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00:00Let's talk first of all about carbon nomics climate change and ESG. How many more products as a percentage of overall products are your existing clients asking for. How much more can the space actually grow. All right I think we're just at the beginning in terms of the developments here and as you said this is our first conference dedicated solely to this solely to this topic. But if I look at the support and the participation we've got something like 30 different really big company CEOs participating today. Some of them are from the energy space the upstream oil and gas but also renewables mobility companies consumer products companies. So really there right across the economy. And we've got something in the order of 5000 participants broadly from the from the investor universe. So it's a huge focus and huge interest in the topic. And Biden's election obviously gives it further impetus. We've had some pretty encouraging news in you know over the weekend. It's a vaccine. It's what we've seen with maybe commitment of the US going into climate change. Are we at a point where we're maybe too optimistic that things will move on the vaccine front that things will move on the climate change. Well let's let's start with climate change. Europe has obviously shown no real leadership in this space and the green deal is just another example of it. The U.K. is certainly doing its bit. But but over the last period of time we've seen China really commit to two net zero. You know Biden has said with what he said and we'll have to see how this plays out in the US. You obviously if if Biden had if the blue wave had actually happened and he'd had full control of all you know both Congress and the Senate you know it would have been an easier path for him. So yeah if he doesn't get the Senate he'll need to do this on a cross-party basis. But there's obviously a lot that the president can do without Congress through regulation through appointments of personnel. And clearly you know the US is moving in that direction. But I think the important point is that you know the world is he's obviously going to be able to move more quickly if it has good policy support and good government support. But I don't think the world is going to wait for that. You see society broadly supporting the move in this direction. You see capital flowing towards ESG friendly products. And we would argue that the cost of capital for an environmentally friendly project is lower than the cost of capital for a for a carbon heavy project. And so you you're seeing capital moving in that direction. Investors broadly are demanding it. And so that's the way that the economy is going. And so I think I think we're at the beginning of this journey. I think there's a huge opportunity both for investment spending and this won't have to sit on government balance sheets. This can come largely from from the private sector. That will lead to I believe meaningful we believe meaningful job creation over the next period of time. You just think of the infrastructure spend that's required and the type of jobs that can get thrown off by that infrastructure build. And so I think it's a terrific opportunity and it'll help drive the recovery from what we were all going through right now. I hear from a lot of policymakers you know the need for bigger and better carbon like a better functioning carbon markets. What's the role in banks in that. This is a really important topic. Carbon pricing here has been a topic that's been with us for some time and I think if we honest with ourselves it's really not been that successful. So you look at the average carbon price and it obviously varies around the world but the average carbon price is the order of magnitude you know three three dollars right now. Yeah that needs to get much closer to sort of 75 to 100 dollars. So that's where the European policymakers would like to see it. And there's a potential for a mandatory drive at this. The board of tax that the EU talks about we'll see if they can get that done. But that would obviously be a move in the right direction. And in many ways it makes sense. If you're going to force your economy to go to net zero here why would you expose it to carbon leakage from other parts of the world. And so carbon unfriendly products are going to be coming into that economy having a border tax. You can see how that works but obviously that's a complicated thing to get resolved. The US position now makes it potentially more likely. So. So that's one drive. But then there obviously voluntary markets and from a consumer point of view consumers wanting to have net zero carbon products corporates wanting to get to net zero. And you see the list of corporates that are signing up to those commitments are growing day by day. They're trading carbon is going to be for real. The demand for it is going to it's going to grow. And so the question is how do we bring this together in one place. This is a real opportunity for London as a financial centre. If we if London could could be the centre of a global carbon market which was deep which was liquid which was accessible where there were markets RTS markets potentially. But bread markets with common standards and structures and VIX people could satisfy their needs whether they're buyers or sellers. And I think we going to see that grow. Richard when you look at what the fourth quarter has been like so far for you bankers and traders. What can you tell us about volatility. What can you tell us about what's in the pipeline if we do have encouraging news for the vaccine if we have it sooner than expected. What does it mean. Much more activity with IPO rose Emma Chandra like. Yeah. Yeah. Throughout this year there's been a huge amount of activity and you've seen that in bank results that activity clearly continues there. The speed of recovery the pace of recovery it continues to be strong and robust. Yeah we've all seen the vaccine use of the week. The expectation is that we'll see a lot more vaccine use over there over the coming weeks. And so we I think what we can see now is a bridge to sometime next year let's call it the spring and this vaccine really being deployed broadly. By that point in time. And so really the beginning of being able to get back to more normal existence inside to put some of the lockdowns that we're currently going through. But behind us so you so you can start to see a bridge. Now we have to see how this plays out. But I think you can you can see that there is obviously a great accelerator to the markets this week. We'll continue. We'll continue to see that. But I think the two things you need to think about. We saw great UK data but from a very very low level and I think that's broadly the case around around the world. And so as we go into next year it's going to be a year of recovery of growth will be it from relatively low levels. We shifted our S & P forecasts for for 21 yesterday and you've seen those numbers. But broadly I think equity markets this is capital appreciation plus dividends. Yes somewhere in the high teens in terms of driving returns next year quite possible albeit from you know from your relatively low positions. I think that transition I think this is you know this is maybe the real key theme here. Know transition and rotation performance year to date has been really driven by those companies as we've seen which would thrive and prosper in a acceleration towards the digital world. And that will continue. There's a secular growth trends. Yeah but companies which have really prospered from a sort of stay at home economy if I can use that phrase. But as things start to open up again and people see the prospects for opening up as we go into as we go into next year there's clearly the chance for those companies to rebound. So if you look at the performance of some of the airline stocks travel stocks leisure stocks over the last few days is this vaccine uses come through it. That's been significant. So yes a growth in those companies share prices but albeit from relatively low levels. And that'll drive some of those returns if we're talking about as we go into as we go into next year.

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Goldman Sachs International CEO on Climate Change, Markets

Goldman Sachs International Chief Executive Officer Richard Gnodde discusses client interest in ESG and climate related investment opportunities, the shortfalls of carbon pricing, and what a coronavirus vaccine can mean for markets. He speaks with Bloomberg’s Francine Lacqua from the inaugural Goldman Sachs Carbonomics Conference on "Bloomberg Surveillance." (Source: Bloomberg)

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