Brookfield’s Mark Carney on the company’s new $15 billion clean energy transition bet

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Brookfield Asset Management announced last week that it had raised a record $15 billion for its first Global Transition Fund. It is the world’s largest private fund dedicated to the net zero transition, signaling that investors are still committed to building cleaner portfolios.

However, some blame the ESG investing trend for high energy inflation. Critics say the focus on clean energy has dampened investment in fossil fuels, which would otherwise have helped boost supply.

Mark Carney, co-head of Brookfield’s Global Transition Fund, says he disagrees with this criticism. Carney sat down with CNBC’s Delivering Alpha newscast at last week’s SuperReturn International conference in Berlin, where he explained what’s fueling inflation in gas prices and fuel costs. energy and weighed on the state of US monetary policy.

(The following has been edited for length and clarity. See above for the full video.)

Leslie Picker: I want to ask you about some sort of central banker – if you can put that hat on me, because there are so many crosscurrents going on right now. And I just want to get your perspective on the United States in particular first, because that’s where most of our audience is. Is a soft schedule still on the table? Or do you think the tough decisions have to be made, and that may mean more pain ahead?

Mark Carney: This is a very narrow path for the US economy to grow through this period. Unemployment must rise. Financial conditions have already tightened quite a bit, I think they will tighten a little more as well. And look, there’s also some really big headwinds from the world. China is effectively in recession, or here in Europe it is on the verge of a negative quarter due to war and other factors. So the US economy is strong, it’s robust and flexible, households are flexible, there’s a lot of positives here. But to thread the needle, it’s going to be hard.

Picker: Do you think 75 basis points is enough?

Carney: It is certainly not enough to bring back inflation and restore the balance of the economy. be important.

Picker: Do you think the Fed has lost investor confidence, that investors now view them as being overdue in getting the situation under control?

Carney: I think the Fed itself and Chairman Powell recognized that perhaps they should have started earlier, acknowledging that inflation was not transitory. It’s all different ways to call it behind the curtain, they recognized it. I think what the Fed is looking to do, and where it’s going to keep investor support, is if it’s clear that it’s going to get inflation under control, it’s going to get ahead, than it thinks not that they can bring inflation back to target through small interest rate adjustments. The words and what President Powell has said, what Jay has said, these last weeks and these last months, [they’re] establish more firmly that they are going to do their job on inflation because they recognize that doing this in the short term is better for the US economy, better for jobs in the medium term.

Picker: One of the factors that people have highlighted in response to all the inflation we’re seeing in the environment is this move towards ESG and this focus on renewables and fossil fuel divestment. There are some critics who believe that if we had focused more on this type of investing, we might not have the same kind of inflationary environment that we have, at least when it comes to the prices of gasoline and energy costs and things like that. From what you see on the ground, is that really the case? Is it a criticism or a reality or is it just a talking point that people use?

Carney: No, I disagree with the review. I think that’s something we need to be aware of in the future. And we’ll get to that…we’re on the cutting edge of the financial market, the private equity world, and the debt world, and look, they were burned in the US shale in 2014-15. No capital discipline in this sector. Destroyed a lot of value, and they withheld shale capital, which was the marginal barrel of oil. Because of that, because of old-fashioned capital discipline. And that’s what happened. That’s part of what made things so tight. The second point is that the industry as a whole hasn’t really invested or added barrels during COVID like a lot of other industries haven’t added barrels during COVID and has been overtaken by this resurgence of demand. Now your question, however, is important for the future, because we need to invest enough in fossil fuels for the transition while there is a significant increase in clean energy. So the answer is not the lack of investment in fossil fuels, and that’s not why gas prices are where they are. Unfortunately, it’s a combination of what’s happened over the past five years, the reasons I just explained, and also, quite frankly, because there’s a war going on.

Picker: And that’s why you’re overseeing the energy transition strategy, not a clean energy strategy.

Carney: Brookfield is huge in clean energy. We have 21 gigawatts in existence, we have 60 gigawatts in the works worldwide. So we are very active in that. But what we’re equally focused on is getting to where the emissions are and getting capital to the steelmakers, the automakers, the utility people, the energy people to that they can make the necessary investments to reduce their emissions . That’s where you find an enormous amount of value, returns for our investors – ultimately retirees, teachers, firefighters, firefighters, others, retirees around the world – that’s where we create value for them. You’re also doing good for the environment because you’re reducing emissions across the economy and that’s what we need.

Picker: And is it also the same objective with the Net Zero Asset Managers initiative? I think that’s $130 trillion in assets under management behind this idea of ​​having a net zero portfolio by 2050.

Carney: Yes, and it’s really a question of transition. So again, yes, a lot of it will go to clean energy. I mean, clean energy needs are about $3 trillion a year. So that’s a huge investment opportunity, but again, go where the emissions are, reduce them, and help reduce emissions in sectors that won’t last their entire economic life. Look, we are here in Europe, we are here in Germany. Germany has implemented a number of things. So they’re going to have a clean energy system by 2035. They’re going to speed up the approval process for these projects from six years to one year. They are putting legislation in place across Europe. They’re tripling the pace of solar, they’re quadrupling the pace of hydrogen throughout this decade. A huge opportunity here in Europe, which is being replicated elsewhere. But what comes out of that is industrial decarbonization, if I can put it that way, and so Brookfield can play both sides on clean energy, but again, really going from everybody, from the technology to car manufacturers and steel, to help these companies move.

Picker: Interesting, because industrial emissions are the biggest piece of the pie, not necessarily how you drive your car.

Carney: Well, yes, those are the industrial emissions. Some of them are some of his automobiles, but some commercial real estate. We are big in commercial real estate, we [have] I have to do it as a whole. And what it does is provide – we were talking a moment ago about macroeconomics, there are challenges with inflation. There are actually big benefits with the scale of investment needed at the very heart of this economy. If I were to go back 25 years, the level of investment was about two percentage points higher in the world relative to GDP. In fact, we’re going to get that back through this transition process that has great multipliers for growth and of course for employment.

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