Jane: [00:00:01] Hello and a very warm welcome to the LSEG Sustainable Growth podcast, where we talk to leading experts about a wide range of topics covering sustainability, business and finance. I'm your host, Jane Goodland, and this week I talk to Ben Daly, who's the Global Head of Transition Finance at Standard Chartered. We talked about some of the transition finance deals that they're involved in across the world, raising capital for large decarbonisation projects, including a wide range of technology from carbon capture and storage to renewables and pretty much all aspects of electrification. So let's hear more from Ben. Well, hello, Ben, and thank you so much for joining us here on the LSEG Sustainable Growth podcast. Now, I am absolutely looking forward to this conversation because I think you've got a really, really interesting job. So I can't wait to get stuck into that.
Ben: [00:00:52] Thank you very much, Jane. Really good to be here.
Jane: [00:00:55] So you are the global head of transition finance for Standard Chartered Bank. I'm curious. What on earth does that mean? What's involved in the job? And how on earth did you come to be doing it?
Ben: [00:01:08] Okay, let me start with the first bit of that. What is transition finance? So we set up a team a couple of years ago, and it's really focused on ensuring there is lots of capital going to decarbonisation projects globally. So effectively, we're a team of about 12 to 15 people set up between London and Singapore. And we are focussed on large scale infrastructure projects very much linked to decarbonisation.
Jane: [00:01:33] How on earth did you come to be doing that job?
Ben: [00:01:36] Yeah okay. So good question. So I've got a natural resource background. So I've been working with oil and gas and metals and mining clients for some time. And I think the sort of the turning point in my career was got involved in a really fascinating project in Iraq in about 2022. And this at the point at the time was the largest anti-flaring project anywhere in the world. And it was a sort of joint venture between the Iraqi government, Shell and a company called Basrah Gas. The outcome of this project was effectively a saving of around 10 million tons of CO2 every year. And it kind of really sort of kick started my interest in using capital to enable the large scale decarbonisation projects.
Jane: [00:02:19] Yeah. I mean, 10 million tonnes is quite a lot, right? I'm interested now to get to a bit of this sort of the detail and the what this means in practice, because we kind of hear transition finance as a bit of a term that's bandied around quite a lot. And sometimes it's difficult to kind of know what that actually means in practice on the ground in terms of projects. So can you give me a sense of the deals? Are these really sort of massive deals or are they small deals? And I suppose the next question onto that is really does that represent enough or do you think that this is kind of a massive market that's only just beginning.
Ben: [00:03:04] Yeah, absolutely. So I think the first point is that transition finance hasn't yet got a definition that everyone aligns to. So I suppose what I'm doing here is giving sort of Standard Chartered and potentially Ben's view on what transition finance means. So if I overlay or start with Stanchart generally focuses on big projects. So we are working with large sponsors or large developers, and we focus there primarily over sort of adventures or sort of technologies start-up businesses. So point number one is these are big projects. And just to give a couple of examples of that. So we've in the UK recently been supporting the first wave of carbon capture and storage projects. So these are in the north east and the north west of the United Kingdom. And these are multibillion dollar projects. We've also supported a whole host of Gigafactories developed across our home networks.
Jane: [00:03:55] And what do you mean by Gigafactories just so that we're clear?
Ben: [00:03:58] Yeah. So Gigafactory. So if you are driving an electric vehicle, Electric vehicle is effectively a large battery pack with some wheels and a couple of seats in it. The core component of that is obviously the battery, and a Gigafactory is the part its manufacturing of batteries, basically.
Jane: [00:04:13] Okay, okay.
Ben: [00:04:14] But each one of these manufacturing setups cost billions of dollars. So I think most of our focus has been on the sort of the core infrastructure that you need to have in place to enable decarbonisation. So that's sort of point one. We're focussed on the bigger projects. And number two is, is it enough money? I think the answer has to be no, in so far as all climate science is pointing to the fact that the world is still getting hotter and climate events are occurring more frequently, or negative climate events are occurring more frequently. So I think on one hand, there isn't sufficient capital going to low carbon solutions. I do want to sort of preface that by saying that there is also a huge amount of money going into projects. Again, we do a lot of work in China. We do a lot of work in India. And so even the heaviest emitting countries are still making vast investments into renewable energy, into the development of newer, cheaper solutions. So I think the example there would be electric vehicles, the cost of batteries continues to come down, and the cost of solar panels also continues to come down. So the answer is probably not enough, but there's certainly a lot of capital being invested today.
Jane: [00:05:23] And the IEA figures actually correlate with what you're saying there because the latest figures are showing that we've got actually kind of more investments going into clean energy than kind of more traditional fossil fuels in 2024. I think it was. So actually, I think we have got we've sort of moved to an interesting point in time with respect to clean energy investment, haven't we?
Ben: [00:05:44] So I think there is a lot of investment. I think the underlying demand for fossil fuels is still very strong and will be very strong for probably our lifetimes. I think if you look at there's still a huge amount of coal used across energy production. Oil and gas is still growing in many parts of the world. So I think this kind of hybrid scenario of renewables increasing, but the actual core demand for fossil fuels, not necessarily decreasing particularly, is something that I think we will be seeing across the energy complex for quite some time.
Jane: [00:06:17] And of course, that reinforces the fact that overall our demand for energy is increasing overall. So it's not just a case of changing the energy mix over time. It's about changing the energy mix while also meeting that increased demand for energy overall as we see different countries in the world's energy consumption demand increase.
Ben: [00:06:39] Yeah, I think that point is sometimes lost when you're looking at numbers that are showing increased investment into renewables or increased adoption of renewables. Often that increase is being used to satisfy the additional demand. It is not yet replacing the legacy oil and gas or even coal power and energy solutions. I think for a purely or totally decarbonised world, there's still an awfully long way to go.
Jane: [00:07:05] So let's talk a bit more about the variances that we see across the world, because I know that Standard Chartered is involved in deals across many, many markets, which makes you an incredibly interesting firm, I think, because you've got so many perspectives and we know that kind of energy transition looks different almost in every country that you land in, right? Because there's lots of dynamics at play. How should we be thinking about that in terms of country by country? What are your perspectives of working different markets around the world in your core business around? Well, Ben's core business of transition finance.
Ben: [00:07:42] So I think this is one of the most interesting parts of the role is trying to understand the and it's not just regional but sort of country variations in motivation. So try and sort of give a bit more colour around that. So we're working on a sustainable aviation fuel project at the moment and in Western Europe. The motivations for that project are primarily regulation. And so there is now a blending mandate. You've also got a consumer base who are at least willing to consider paying a bit more for their flights if it is a lower carbon option. So that motivation is clear. But then we jump into one of our other home markets. I spend a lot of time in India, and the motivation there is often very different. And here you've got a country that is a net importer of oil and gas, and it's only one of its largest US dollar outflows is procuring oil and gas. And so the motivation there to generate an alternative fuel source that is free of being beholden on global energy prices is probably one of the certainly the major motivators to develop a hydrogen economy domestically. For example, if we keep going further east in China. Again, the motivation is different. So whilst China is the largest gross emitter, it's absolutely critical for producing the vast majority, in fact, of the technological solutions to decarbonise. So whether or not that's that, solar panels, batteries, etc. So the motivation there in some ways is actually sort of growing market share and GDP growth within China. I think that is one of the sort of the core complexities when you're trying to solve a global problem, is that the motivations in many of the markets are entirely different, and so trying to find sort of synergies across them, and then also ensure that the supply chains across the relevant players across the decarbonisation value chain are all aligned.
Jane: [00:09:41] But why does it matter that the motivations are different?
Ben: [00:09:45] Not necessarily. And actually, I think we get too fixated on trying to see alignment. And I think that there's always a danger certainly. Working for a bank that's PLC in London is to try and apply a sort of a very much a London or a Western lens on motivations across all our clients. And I think certainly me as a sort of banker, the more success I can have in understanding what is driving our clients to make certain investment decisions. And the more effective I am at being able to deploy capital. And as long as we keep coming back to the core principle of trying to decarbonise and trying to sort of enable the energy transition, then I think it's a success.
Jane: [00:10:28] So we've talked a bit about the different technologies that are receiving investment. So you mentioned carbon capture and storage. You've talked about sustainable aviation fuels, you've talked about solar, etc.. I'm thinking like Ben's at a dinner party and someone asks you, so, you know, like, what's if I was going to put my money somewhere, you know, what's the best technology? There always seems to be this debate about kind of what's the best technology that we could deploy. And I suspect the answer is, well, it depends. It depends where you are and all this sort of stuff. But, you know, from what you're seeing, what are the most compelling technologies right now that your customers are looking to get finance for?
Ben: [00:11:12] Okay, so I think rather than saying it depends, I think the answer is more that there's no one silver bullet. And so the solution needs to be a hybrid solution and needs to incorporate all sorts of different levers. So that said, the single most important thing I think we can all be doing is driving electrification. And by that I mean increasing renewable energy. But you can't do that in a silo. You also need to make sure that you've got the grid infrastructure that can support renewable energy. And by that I mean not just the power cables, but you also need a significant amount of battery storage so that if the sun isn't shining or the wind isn't blowing, there is ample power to go into the grid. That additional storage capacity then really helps, making sure that renewables doesn't just sort of support more the retail and the smaller consumers, but actually can also provide a huge amount of power for industrial parks. Electrification then continues into EVs, and I think the whole evolution of auto vehicles from using combustion engines into electric vehicles is, again, just a core thematic that sort of plays back into electrification. And I think that if I had one thing that the world should be focusing on, it's kind of evolving its power mix from coal into renewables and then making sure that you have all of the infrastructure that allows electrification right the way through the energy complex in different regions.
Jane: [00:12:38] Great. You passed the dinner party test I think, you get to move on to the main course. Now, we've talked about some of the projects that are receiving this funding and financing. Let's talk about where the money is coming from. In particular, I'm kind of interested about the relationship between finance that maybe raised by private investors. And then also kind of the role of governments, because a lot of what we've been talking about traditionally is really sort of the government's responsibility to think about their energy grid and their energy provision, etc.. So help me understand that relationship between private finance, government intervention. And also, I'm curious to know, are there any countries that you think seem to be doing that particularly well?
Ben: [00:13:25] Okay. That's a really big question.
Jane: [00:13:26] Should we break it down then you can take the first one. First is what are you seeing between the relationship between government and say private finance. Let's deal with that first.
Ben: [00:13:34] Okay. Well I'm going to start with even more high level. I think what we're going to try and aim for is sustainable projects. Now what do I mean by that? When I've got my bank hat on lending to projects or supporting projects that have got a high reliance on government subsidies carries quite an outsize risk. So it's it's something that I, we certainly look at and we encourage governments to support projects, but projects that are out of the money and really require subsidies are things that, again, you'd really rather try and develop the core demand and supply dynamics that sits behind the project so that they can work without government support. So that's that's always our starting point. So what's the role of private capital. And then governments? I think it's sometimes said that there isn't enough capital to support the energy transition. I don't think that's true. I think there's an awful lot of private capital, both within banks, but also the number of sort of energy transition funds that sit between major investors and global sponsors is huge. It's making sure that there is the right landscape to deploy the capital. And then I come back to the role of government. So I think where governments can be really helpful in addition, or instead of just the subsidy landscape, is the policy landscape. I referenced to the carbon capture and storage projects recently and the setup there was that regulated asset base model, which allowed a lot of private money to flood into these projects in the UK. Again, we've also seen contracts for difference. Again, these are unlocked. So it's not that the government necessarily needs to put in direct capital. It is really just ensuring that there is sufficient certainty that someone that basically the demand signals are there for private capital to come in.
Jane: [00:15:19] And then where are we seeing this work? Well do you think.
Ben: [00:15:23] Okay. Well again the obvious place to look is Western Europe because it's got the effectively the loudest policy landscape. But I don't think it's necessarily the most effective when you compare it to some of the other parts of the world. And I've given some examples already about motivations being different. I think we've got to look at China. I think if you think about the dominance of China today in both the production of batteries, the production of solar panels, also a lot of the kind of the core refining of the materials that need to go into batteries, etc., that control and that sort of cost effectiveness of producing and core component parts is something that is now becoming very enviable for the rest of the world, I think. Other areas that are sort of doing things well linked to sort of policy. I do think there is just a big opportunity. And I referenced India earlier about if you can find a scenario where you're a net importer of a commodity or there's a domestic subsidy in place for the fossil fuel alternative, like turning that off or turning that support into something that is driving a sort of clean energy outcome, I think can have huge impacts or huge positive impacts, because firstly, it decouples you from a global market, but then also drives a cleaner energy outcome with greater security domestically.
Jane: [00:16:41] So let's move to another market, which might be a bit trickier. And that's Africa. Now I know that Standard Chartered has got a big footprint there. So I'm curious to know what your experience is in the African markets around energy transition or transition finance.
Ben: [00:16:57] I think there's always sometimes a misnomer. So again I referenced having Zambian family earlier. I've also done a lot of work with the mining sector. So Central Africa, so Zambia, DRC, etc. they've got a huge amount of green energy. So it's hydro, it's not wind farms. But if you look at the grids of Central African or many central African countries, it's sort of north 95% clean energy. So in some cases, the demand for a requirement for the energy transition isn't necessarily there as strongly. I think the point for many countries in sub-Saharan Africa in particular, is energy access. And I think the motivation for Stanchart and for many others in that instance is to ensure that energy access is, or that extra demand is satisfied through clean energy solutions rather than building new coal power plants. And I think there's a lot of again, I'll come back to policy as a really good example. So if any listeners have been to South Africa in recent years, loadshedding has been a real issue. The big unlock there was a policy change that allowed basically private enterprises to build power up to 100MW, versus the historic regulation that required you to have a full generation license.
Ben: [00:18:19] If you built over one megawatt now, as soon as that policy unlock occurred, then private enterprise picked up, and the build out of renewables in South Africa has been incredibly impressive. That has provided a number of upsides. One is just greater certainty of energy. Loadshedding has decreased. So you've got an increase in clean energy reducing the reliance on coal power. And three I think has also just been a very good economic driver. I think lots of people have built businesses and have had had some significant financial successes out of it. So I think that's sort of coming back to your point earlier about every country being very different. I mean, Africa is obviously a huge landmass with multiple different complex countries within it. But it's and it may not have the same number of large scale transactions announced as other parts of the world, but I think there is still a great opportunity and in many countries already quite a decarbonised grid.
Jane: [00:19:14] That's really interesting. I think that's a different perspective than I've heard previously, so thanks for sharing that. I want to move us around the world again and back to London, basically where I think you are located today, to really think about kind of London as a hub for transition finance. And I'm wondering whether or to what extent is that a reality and to what extent could London be a kind of a catalytic force for kind of more international transition finance?
Ben: [00:19:44] Yeah, and I referenced before that there isn't yet a sort of global standard, but I think the City of London and sort of broader London financial services has invested a lot of time over the last 18 or so months to try and accelerate and coalesce around some core themes in respect of transition finance. So I think to respond to your question, there is motivation. And I've been really impressed with a lot of the work done and I'm encouraged. I think my part of the transition finance world is less around the policy or the landscape. It's more around the real asset deployment. So I think in addition to the great minds that sit in London and kind of the motivation to create the frameworks, I think we're also just a really good place for raising money for large infrastructure projects. And that is effectively what transition finance is. It is low carbon infrastructure. The fact that we have many large banks and treasury centres that sit in London is helpful for the actual deployment of capital. We've also got close proximity to a lot of services that help mitigate the risks.
Ben: [00:20:49] That could be the insurance market, it could be our legal profession, etc.. The other piece, and we've spoken maybe less about it today, and partly because I've worked for a bank, not a financial sponsor, is that there are also a lot of investors and a lot of financial sponsors that sit in London, and we've spoken about countries outside of Western Europe. And I think there is a lot of the organisations that are willing to take risk in Africa or across Southeast Asia or more developing markets also have big presences in London. So I think it feels that there is a real opportunity for London. Whilst again, we haven't spoken about the venture side of pieces, the research and development, I think that's the other area that the UK will hopefully be able to make strides in. There is just this real need for new technology, new solutions to tackle some of these projects. So London pivoting not just to financial services and the enablement of money, but also the R&D component that sits behind it is the stretch objective, I think for the UK.
Jane: [00:21:47] How very exciting, Ben. I think it really does feel quite positive in terms of a sort of a maturing of the financial ecosystem and all the other parts of the ecosystem that feed into that to be able to mobilise capital to these decarbonisation projects. So exciting times, and thank you so much for sharing with us a bit of a whistle stop tour around the world. Actually, about some of the projects that you guys are involved in, and also how to think about this in a sort of localised way as well. So I think it remains to say for me, thank you very much for coming on the show and sharing your expertise and telling us about your day job, which I think is fascinating. So lucky you having such a fascinating job. Thank you very much. Again, great to see you.
Ben: [00:22:31] My pleasure. Thank you.
Jane: [00:22:32] Well, that's all we have time for, I'm afraid. But I hope you enjoyed that episode with Ben. And if you did, please don't forget to follow us and rate us on Spotify, Apple Podcasts, or any other platform you use. If you've got questions, comments, or someone you'd like us to talk to, then do get in touch by email at fmt@lseg.com. That's all from me, but watch out for the next episode very soon.
