Name: Fortune Global Forum 2023: Financing The Shift From Brown To Green
Uploaded: 2023-11-29
Duration: 14 min 13 s
Description: Isabelle Kocher de Leyritz, Founder, Blunomy; Member, The B Team; Former CEO, ENGIE In conversation with: Hala Gorani, International Correspondent, Journalist, and Author

Isabelle Kocher de Leyritz, Founder, Blunomy; Member, The B Team; Former CEO,  ENGIE In conversation with: Hala Gorani, International Correspondent, Journalist, and Author

Fortune Global Forum 2023: Financing The Shift From Brown To Green

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OK. All right. Brown to green. Well, before we dive into how and how much what is brown to green? First of all, uh good morning. Good Mor good afternoon for me. It's morning for you this afternoon. We don't know what time it is here in the Emirates Palace. Well, happy to be there. Uh Brown to green. What, what do we mean when we say brown to green, it's uh to distinguish that from pure uh green. Uh meaning we spend a lot of money to develop green start ups and that's very good just to be pursued. But it's also very important to move the brown. I mean, the existing players, the existing industries to something that is green. So this move from brown to green of the existing leaders is as important as to nurture and finance emerging leaders. So here is brown to green. How to move apart for you. That's true for a company that is a portfolio of activity. That's true for an asset manager. Typically how to move the portfolio of assets towards something that is drawn at the beginning and that has to become greener. So this is across sectors across regions as well. And the title of this session is financing this shift. Could you expand on that concept? I I come from the energy industry um that experienced that grow to green transformation before the others 10 years in advance. And as a, as a big cooper, you have to precisely to move your portfolio of activities towards something that is greener. We were a champion of uh power production through coal, uh coal production in the world in a lot of countries. And it was a very profitable business for us. And the topic when you and that's true for energy, but that's true for almost all the sectors when you start moving from brown to green is that the green activities at the beginning, they are not as productive and profitable than the existing ones. So here is probably the main topic here you have to overcome when you start to shift from brown to green is that typically renewable energy was not as efficient, was not as productive, was not as profitable as cool activities. So I want to ask you about the cost of transitioning and then the cost of not transitioning. So first of all, how do you over? Because as a consultancy, you're going to try to convince boards to overcome a certain reluctance. I believe the first condition is to lead that from the future not seen from today. If you look at that from today, you compare the profitability and a lot of things and, and you cannot move. If you look at that from the future, you say, OK, we are 10 years from now and let's try to guess what are the conditions for existing activities of today, but for emerging ones. And here the picture is fully different. If if you leave that from the future, you can afford and you can um and you can explain and you can have a case, you, you can convince on the good news is that there are more and more tools, data to help people guessing what will be the profitability? What will be the valuation of the activities? I mean, in 10 years from now at at Bruno me, uh it is what we do with uh it's what client ask. So we are specialist of transitions. We help industries to transform their portfolio and we help them get guessing what will be the profitability and the and also the efficiency of emerging solutions that that they are expected to to develop. Let me, by the way, remind our audience that if you have a question uh for Isabel, uh do not hesitate to put your hand up and we'll get you a microphone as well. So this is, I mean, many of the people here attending are either industry leaders or work in the corporate world and may have questions about the cost of transitioning. But also I think importantly, the cost of not doing so because that's one that we talk less about. Yeah, if I go back to the, the the case, I know the best, which is this energy company? Il uh I mean, we decided to transition, it was a bit early. We were probably the first doing doing so. It was 10 years ago and we managed to have value creation case. Very strong. Uh It was a deal with the shareholders. It's maybe the second lesson we can draw from that experience of the energy industry, that it is necessary to have a deal, let's say, with long term shareholders and to share the case with them and to convince them and to, I mean, and to adapt if needed. But that there is a case for value creation, but on several years, in our case, it was four years which is not very long for a group that was 100 years old and a bit more. So um in our case, we managed to, I remember this figure because it's a double 50% it was uh 50% less carbon emissions at the end of this four year period versus the beginning and for a share total share, the return of 50%. So that's interesting because initially, I'm sure you you may not have in fact but experienced some reluctance. I mean, in a shareholder system where quarter to quarter, it's important to show returns. How difficult is it to then argue that your timeline should be a little bit longer because ultimately the returns will be higher. You, you, you have similar types of shareholders. You are very short term oriented shareholders. They cannot agree or support. Uh They can agree but they cannot support if, if an efficient way you transition because they enter and they quit and et cetera. Uh so, but you can rely on some long term ones. They are, this is uh an important conversation to have with them. It's what we did before starting the transition. So we had almost 12 months of roadshows with long term shareholders discussing with them the best way to transition and getting their support to say, OK, you, you discuss the duration of that we landed at these four year period I I mentioned and we get their support, not a lot of them but a sufficient pool to, to, to open the room and to make that you have the room for maneuver to, to efficiently uh transition your model. And they were perfectly aware that the beginning the curve was decreasing because by design, when you stop your activities or your our cool activities, in this case, they were the most profitable activities of our group, we were extremely efficient in this technology, we were extremely profitable. So by design, when you stop that, you stop by having, I mean less cash flow uh coming that you, you managed to be uh quick enough to re profile, rechannel these resources to learn new activities. And this, at this moment, we started renewables because we had nothing in this domain. And we started at this moment. And I'm wondering because as you're describing this process, I'm wondering, have you in the several years since you've been um the consulting and advising corporations and industries to move from Brown to Green? Have you noticed a shift in awareness among executives and boards? Is this and, and if so why, what, what is it, why is there a change there? I see more and more Corporates, let's say industries and also more and more uh asset managers or asset owners. Speaking about future proofing, the question is, are you, are we as a company, future proof? So this is, this is really something that is seen as a risk not to be future proof and that's new that, that raising, it's not absolutely new, but it's raising a lot and, and there is difference between industry and uh and uh shareholders as a shareholder, you can switch your portfolio overnight. So you suddenly realize that a given company is no longer, should you prove every time you say something its accompaniment? No more movement, we're fine, we're fine. Um Your mic is not working. OK. That's ok. Maybe we'll get you a handheld. Uh Here you go. We have one of the and by the way, let me reiterate, I don't know if I've, I didn't have not seen a hand go up. But if you do have a question. Go ahead and put your hand up, maybe not. That's OK. We have, we have enough to, we have enough. So here's your microphone. So we were talking about attitudes and boardrooms. Yes, go ahead. So more and more awareness on the fact that future proofing is the key. And I'm part of them looking at that from the opportunity side, they are really Corporates believing that this is an opportunity for them. I believe they are right for the most innovative companies. This is an opportunity also and that that a lot of uh Corporates are realizing more and more that there, there is the risk not to move. Yes. So if you have to give a like just general advice to corporations, companies, um people with business interests, portfolios as well to make this shift, what would your first piece of advice be first? Look at that from the future? I I repeat that but it is absolutely key. If you look at that from now, you cannot move it too, too costly. If I may say second um build alliances. Yeah, this exploration because it's an exploration, you cannot do that alone. So in our case, we had uh alliances with our unions and employees more generally because it's a big shift. You imagine you, you, you stop a lot of plants, you have people on these plans. So how do you manage to, I mean to retrain them to help them understanding where it could be their next job. So this is a huge uh this is extremely important for you to gather, to embark people on that move. So build alliances with the teams, of course, but also with uh suppliers, with, with, with and with clients. The scope three, the scope three topic. I don't know if everybody is familiar with that. The scope three emission. Now, if you could do emissions, this is for a company, the emissions that are not exactly in your parameter, your legal parameter, let's say, but the emissions of your suppliers or the emissions of your clients, all the frameworks are increasingly including ISSB which is really a big move, taking the SCOPE 3 CO2 emissions in what they ask as far as disclosures are concerned. This is a huge change. It means that when you are in, when you are company, you you to be sure that your supplier will survive, your client will survive. You need to, to, to ask them what they intend to do regarding transition. So it becomes something that is about alliances with your suppliers and your clients. So to build alliances in my views. So scope three, meaning up and down the chain horizontally as well. What are the emissions of the whole chain? For example, at the bloomy company, I already mentioned we work with a big mining company uh that has decided to engage its clients and I screening the portfolio of clients detecting the clients that have not yet any commitment for decarbonisation and starting an engagement process with all of them. Ask, OK, why no commitment for the moment? What do you intend to do? Uh I would be sure that I would like to be sure that my, my portfolio of clients as a company is effectively moving towards something that make this client future proof. And it seems as you mentioned, there's a realization that this is an essential thing. Um We've run out of time, Isabel Coa thank you so much uh for, for joining us, the founder of gloomy and who's worked extensively in the energy industry and managed and helped to manage, helped others manage their transition from brown to green. Thank you so much. We appreciate it.