The Founder of ESG: How a Team of Renegades Defined Responsible Investment

Hello, hello, hello. And welcome to the ESG In Property podcast with Adam Hinds and my trusty co-host Jordan Relfe and our show is dedicated to educating real estate professionals on the topic of ESG by interviewing the world's leading sustainability and socially impactful property experts. And we're trying to extract their ideas, their innovations and advice to give you the information you need to deliver the best buildings on earth.

And today we have the mother of all guests and topics on the show for you. Today we've got the founder of ESG. Yes, you heard that correctly.

The man who coined the phrase ESG, Paul Clements Hunt. And to be honest, this was the hardest bio that we have ever written as Paul has literally been all over the world. He's done absolutely everything you could ever dream of doing in a professional career.

So summarizing the impact Paul has had in a very short bullet point list was actually impossible.

So trying our best to keep this brief. Paul has been a United Nations official from 2000 to 2012, managed the United Nations Environment Programme Finance Initiative, coined the phrase ESG in 2004, delivered the UN Principles for Responsible Investment in 2006, founded multiple businesses, including the Blended Capital Group, advising governments, the world's largest banks, insurers, investors.

to help them tackle climate and ESG challenges and is now a strategic advisor at Michicon de Rea law firm in the UK. So Paul, firstly, achieving impact like that in a career like that is no fluke.

So on behalf of the entire population of the world, thank you for everything that you have done and we'll continue to do, I'm sure.

And secondly, absolute honor for Jordan and I to have you on the show. So a very, very warm welcome to the show.

Paul Clements Hunt (02:41.478)
Yeah, no, great to be here, Adam, Jordan. Looking forward to it and having a proper, let's say, proper chin-wag in terms of, and some colour as well about the journey I think might be useful.

Adam (02:52.732)
Love it.

Love it.

Jordan Relfe (02:53.614)
Absolutely. Well, Paul, welcome. It's an absolute pleasure to meet you and thank you for taking the time to join us.

Apologies for the call that I was just on a minute ago. That was very gracious of your time to wait for me. So thank you very much.

Paul Clements Hunt (03:08.326)
As long as the horses come in that would be good.

Jordan Relfe (03:12.598)
Yeah, I'll share the spoils when we get them back.

So don't worry. That'd be all good. I think we always like to start these shows with a background to our guest and a bit of an intro to you.

I think what's really intrigued us is and will be to those listening is about your passion for sustainability and impact. So over to you to give us bit of an introduction.

Paul Clements Hunt (03:32.396)
Look, I'll give you the sort of Formula One version, but my economics degree back in the 80s and then I was a true lowlife.

tabloid journalist in the UK. So if you think of the Sun and go south of that, that was me for about five or six years and it was perfect.

It's still a heavy drinking culture and you didn't really start work till noon. And there's a connection between the tabloid piece and ESG which I'll come to but I'll keep this short. look, journalism in 80s, I got obsessed by, would you believe, oil companies trying to influence

an Antarctic environmental protection regime treaty and that sort of sucked me into the environment space and you know as I don't know if you two were born then but 86 87 was since sustainable development came along so it's part of the gig so I I wanted to move from journalism into environmental business and I don't know if I'm allowed to use bad language on this but an ancient Antarctic scientist sitting at a cafe in Chile

Gave me a piece of advice and he was a real old Brit had been on the ice for 40 years and I said look, you know I'm a journalist want to get into environment and he said son Don't go back to Britain.

They'll have you making the tea and writing newsletters for 10 years find a shithole and become an expert so I moved to Bangkok and started a business and Look, so yeah, that was and it was a pretty good impression of this guy I'm sure you may have passed on now, but he'd been on the ice for so long. His eyes were white when you get that haze

from being down south, but you gave me very good advice. So yeah, to jump on, I started a business in Bangkok called the Environmental Business Group in 1990, what would it be, October of 91.

The first day I opened the doors of the business, actually there was a coup, and the first thing I did was to lose the cash float after me and my then wife were sprayed with M16 shot, and it's all true. So my first act in business was to lose money out of the gate.

Jordan Relfe (05:07.352)
Wow.

Paul Clements Hunt (05:36.684)
a serious bit is the environmental business group. was basically a market research business looking at big utilities.

So, sewerage, sanitation, waste. You know, I thought I'd be talking about tigers and the trees and the business became one of, you know, basically environmental market research for the likes of Thames Water, Melbourne Water, tube makers out of Australia, range of people looking at infrastructure. And really early on in the piece,

So would have been of June 92, there was something called the UN Rio Earth Summit, it was the first time the world's leaders had come together to discuss sustainable development.

And my eureka moment was, look, sustainable development's fine, but unless you can move cash and money into trillions through public and private markets, we're not gonna touch the sides of this in terms of infrastructure challenges, social inequality, climate. And then really that informed the next, I guess, 30 plus years, which was...

my own businesses, 12 year stint in the UN, back into business, which is how do you persuade capital markets, again, whether public, private, pension funds, sovereign wealth funds, high net worth, whatever, how do you persuade them that this area is actually investable, it's not an active charity? And yeah, it's been a ride, know, so had my own businesses, been in the UN 12 years, but it's always the same thing. How do you move money towards the problems in a way that

people can ultimately get the risk adjusted rate of return on capital and it's not philanthropy or charity.

So I'll stop there. But I've come to the realization as I approach 60, which is very scary, that I never really left tabloid journalism. I'm still a sort muckraking tabloid journalist pretending to be a business person.

And I hope that's not too long, but that's me.

Jordan Relfe (07:28.91)
Cool mate, amazing background. It's completely left field of where I expected that to have started, which was quite incredible. Your professional career, obviously with UN and founding of ESG, and we'll come onto that in a bit more detail, PRI, be really good to just, you mentioned obviously 12 years at UN.

PRI was something that you founded and you created. Where's that now left you in your current role and what you're doing?

Paul Clements Hunt (07:52.551)
Will you?

Paul Clements Hunt (07:56.787)
There's two or three dots to join. In terms of that progression, I took my first business through 98 and the Asian crash 97-98, came back to a lobbying job in Paris with the International Chamber of Commerce, the Energy and Environment, that introduced you to the UN network, so the OECD and all the sort of, know, the corridor stuff and this UNet

finance initiative job came up and I thought, I'll have a piece of that for two years, know, go get a few contracts and join JP Morgan and then, you know, retire at 35, big yacht Caribbean.

And the job was fascinating. I joined it, it was meant to be a partnership between the UN and banks, insurers, asset managers worldwide. And when I joined it, it had one admin officer and an intern, that was it.

So to speed up and answer your question, Jordan,

From 2000, 2003, basically it was an effort by me to grab bodies and build a team. And over a short period of time, built a really dynamic, super bright, young, off reservation, renegade UN unit where we never asked permission, we just did things. And I think in the history of the UN since 46, we were possibly more on the naughty step than any other unit in the history of the...

the UN.

I say that with great pride. So to link ESG and the PRI very quickly 2002-2003 had a very bright Australian intern James Gifford came along with an idea of you know how do you link pension funds and deep pools of capital with this stuff. That's where it all began.

So bright, smart, intern and then know team got to name them Philip Walker, Jacob Malthouse, Trevor Bowden

Me James Gifford, it's all blokes, you know, so there was no diversity quotient there which came afterwards And it was how do we align the deepest pools of capital? You know the the people who got a hold and protect assets for 20 30 40 years With UN principles and actually there's a fusion point those pools of capital typically in the g7 g20 countries where they've had the longest pension funds

Paul Clements Hunt (10:08.658)
And it's ordinary people. It's nurses, fire people, fire brigade, civil servants, librarians, doctors, nurses. And we took this essence that ordinary people's have got to be aligned with the UN goals, which are peace, security, humanitarian, development, then environment afterwards.

And that was the start point. How do we actually tempt big pots of money into a process?

where we say the interests are aligned and it's not about charity or philanthropy, it is about financial materiality and fiduciary. So that was the moment of I guess about 2002-3, then we had three years of development.

ESG came as a language device, that's all it was. It was gonna be Governance Environmental Social, GES, and this is where my tabloid pass came in. So May 2004, we're sitting in my office in Geneva.

You know, heading the unit, there's five of us in the room.

We had to decide what's it going to be. And it should be GES governance. You get that wrong, it often gets sorted.

But governance is a, you know, it's a boring technical word. So my actual tabloid thinking was environment sexy, can touch it. People like that a bit, gets them engaged.

Stick governance at the end. You know, it is important. It locks everything in.

The most difficult issue for investors and for, you know, the whole financial world is social.

And there's a history of social always being flicked off the end by Milton Friedman-esque lobbyists. So, know, corporate social responsibility becomes corporate responsibility. Socially responsive investment become responsible investment, right? They always try to get rid of the social because it's a pain in the crap.

You can't deal with it. And that's where a lot of your cost base is. So my thinking was welded in the middle, ESG, ABC, 123, it's got a bounce to it.

And, you know, we did that not knowing it. Our objective was to get a trillion dollars backing it.

When we launched the PRI, it was 53 funds and $4 trillion. Now it's 5,450, a staff of 200 and $121 trillion.

Everything sorted, not at all, but it's a big signal to the market. These issues, environmental and social governance, they are real risk issues and there's real upside. Sorry, this is becoming a Castro-length speech.

I forgot what your original question was, but it was just a ride. It was like a...

Paul Clements Hunt (12:31.964)
The 12 Years in the U.N. was like a Jason Bourne movie.

And when the book is written, when the story is told, I mean, the inner guts of it was just unbelievable politics and craft work and luck and bullshitting people and getting away with murder. But the anchoring thing was this is not philanthropy or charity or good deeds. It's based on financial materiality because these risks...

climate, social inequality, ecosystems destruction are real and they'll chew up your assets and also it's the biggest investment opportunity of the 21st century.

So financial materiality, fiduciary duty and final point here is the thing that underpinned it all was a piece of legal work I commissioned became known as the Freshfields report and it was looking at ESG in the context of the nine major capital markets. It wasn't a report it was a legal interpretation and it rolled a hand grenade into the investment community.

So a professor, late Paul Watchman, and a fresh field, unbelievable lawyer. He died last year, just aged 70, sadly.

But he did that piece of work. If we hadn't had the legals, we could never have got the asset owners, pension funds, the asset managers on board. And I think that was one of the key blocks.

Back over to you guys. And just shut me up and close me down, because that was far too long.

Adam (13:56.19)
No need for that Paul the actual opposite we're gonna we're gonna wind you right up ESG why Yeah It comes out when I get excited I Managed to suppress my accent just in my normal day today But when I get excited especially if I had a had a wine or a beer or two it really Really just jumps out but ESG Paul why why the three pillars?

Paul Clements Hunt (14:25.587)
That's why the three pillars there and it's not three pillars. It's one block.

That's one of the key things and You know, it's all interconnected Everyone was a and s and g and then all that massive asset managers drop, know have indexes and try to do metrics ESG was fundamental about culture change within asset owners. It was to capture them through Financial materiality fiduciary debt duty and say look these three things all interact

Adam (14:31.312)
Oof. Oof.

Go on.

Paul Clements Hunt (14:53.746)
They do, right? You the biggest driver of environmental destruction is social inequality. You don't have to visit the Sahel to see that, or the favelas in Brazil or wherever. Social inequality drives environmental destruction.

know, the slash and burn. Let me give you one example right now. Bolivia, which was up until last year doing about 200 million tonnes of carbon a year emitting it, has suddenly become the second largest per capita emitter in the world.

Paul Clements Hunt (15:21.68)
because they moved slash and burn regulation last year saying you can't.

That meant that they've gone from 200 million tonnes of carbon to just short of a gigaton. That's 900 million plus in one year. That's about poverty.

That's about people clearing land and using wood. So again, come back to the point. The three pillars were the social and inequality drives environmental destruction.

The governance piece, whether it's, I now think of ESG at four levels.

ESG 1.0 is systemic. That's all the big problems, climate, ecosystems, destruction, social inequality, all of that. Then you come down to ESG 2.0, which is sectoral.

It's what sector as a company or an investor are you in? Go down a level after that, ESG 3.0, it's about your company, how you compare with peers, and ESG 4.0, brand new.

Really is about the individual executives if you can't align the value set from the systemic Through your sector through your company through you. You're not going to get culture change So again to come back to you. It's that it's just it It's all ESG is almost like a Rubik's Cube, right? It doesn't matter the acronym Really? Yes, G.

GSS, whatever you turn it everything is connected and unless big in and I know this it all sounds a bit academically and a bit, know sort of

Paul Clements Hunt (16:46.288)
maybe a touch wokey. I was challenged by Americans not long ago for being too woke and I said I'm about as woke as General Patton, which seemed to insult them quite heavily. the point here is that ESG is sort of being captured in many ways by metric people, data people, and that's part of capitalism and that's fine.

The original purpose was how do you change a culture of investment that has to change for decades.

So again, was, and I wouldn't say it was all thought in a straight line. It was really much trial and error. We initially just wanted to get the likes of CalPERS, CalSTRS, British Telecom Pension, the Norwegian Fund, the Government Fund of Japan, the Government Fund of South Africa, the APG Fund, all of them.

We wanted to get the big asset owners thinking, shit, these are real risks. They are gonna chew up our assets over the 20, 30, 40 years. need to at least.

Paul Clements Hunt (17:44.562)
if not grow them.

And on the flip side of that is, whoa, this is the biggest investment opportunity of the 21st century, whether it's infrastructure, real estate, getting that right, know, natural, monetizing natural capital, all this stuff which is 20 years on, begin to come into play. So I've avoided your question. ESG is just a block and it's a lens and the recent, a lot of look through it and they understand, okay,

We've got to do the metrics, we've got to do ABCD in it, but it's about changing the culture of our investment institution because you cannot, the nature of risk is changing.

If you look at the data sets for the last 10, 20, 30, 40, 50, 60 years, fantastic. It's a good way of looking at risk, or it was. The nature of risk is changing.

And my own firm, the Blended Capital Group, we should have been bantering on about complex converging systemic risk for about a decade.

Now everyone says the poly crisis and all the different things which are coming in. Our thing is the nature of risk is changing. It's morphing, it's metastasizing.

You don't know what's coming down the track and old data will not tell you as an investor what's gonna happen. It's less reliable. So again, it's that the canny forward thing is get it, yeah, risk is changing.

We don't know how it's working. mean, whether it's the Australian fires, it's the Bangladesh floods, it's what's happening in, pick it. It's happening in front of us.

That's the climate piece, right?

So again, to maybe close that down, is the nature of risk is changing with that. It brings you huge new risks, but massive opportunities. So again, that's been part of the pitch.

Adam (19:24.364)
So much to unpick here and I think I want to just stay on this point of the financial materiality and I presume just trying to connect a few of the dots of things that you've said Paul around Culture change financial materiality focusing on money and trying to get trillions flowing into this space Did you? Was the creation of this block which I much appreciate

Adam (19:53.172)
the correction from three pillars to a block, 100%.

No, it's a tiny change, but small things are the big things. And that flicked the dial in my head. was like, wow, okay, I've been looking at that the complete wrong way.

So thank you for that. focusing on the money, how much of the, I suppose the traction at the beginning was focused on risk management and long-term risk management. Was that the dial that you think or the pitch or the note that people picked up on quickly to go, I understand that this is financially material and could impact my performance, therefore I need to be considering it.

And that's when it became taken a lot more seriously. Do you think that was when the dots were connected at scale for this to start turning?

Paul Clements Hunt (20:39.91)
I think that's it's a really good analysis and just to add to it and maybe monotune it a little bit was and The original thinking was that ESG and the PRI it was always two sides of the coin It was always risk and reward, right? But our thinking was plant a positive virus in the inner guts of the investment chain, which is the asset owners, right?

Paul Clements Hunt (21:04.422)
you know, is the tail wagging the dog or the asset managers wagging the asset owners tail and all those questions. But our thinking was plant it with the big pools of capital who actually the closest to the beneficiaries and that will travel over time along the investment chain and make people think.

But in terms of, I think because of the nature of asset owners, which is first, you do no harm in terms of your assets, protect them.

you know if you can grow them great but if you can get inflation plus 4 % you know and match your assets and liabilities so there's much more of a risk mentality I think within the big asset owners it's risk first and I think that's what got that's what you know that's what gripped was it was the risk side of ESG and the materiality and I mean God save us from where the conversation you know double materiality and dynamic materiality and circular materiality but the original thinking was

How do you capture language and speak to big financial institutions, big investment asset owners? yeah, risk is the easiest way of doing that, you know, and we could point to those things. I think in terms of the 20 years, risk has dominated to extent that ESG is seen as a risk tool. And it was never meant to be because the upside of 21st century investment, whether it's clean energy or getting infrastructure right or...

you know, now actually monetizing natural capital, there is an upside.

part of the effort is to rebalance it. I think also the instinct of asset managers and you know, I've got a pet thesis which we won't get into, but you know, Anglo-Saxon asset management has captured ESG over 15 years as a risk metric. know, Anglo-Saxon asset management loves drop down menus and boxes and all those things.

And that's fine. It's part of...

it's part of capitalism, but risk dominated in a way we didn't necessarily plan it to. And the rebalancing so people can see the upside is important.

Adam (23:12.582)
It's amazing how I just was looking at the dates then that this is actually the 20 year anniversary of ESG being coined.

So there we go. That's pretty amazing.

Paul Clements Hunt (23:25.359)
On the coining, there's all sorts of stories out there, which is, know, is that Madison Avenue, you know, some of the Republicans, if you think of Senator Rubio's letter last year where five Republican governors wrote to the top 50 law firms, you know, claiming that the heads of those 50 US law firms were in danger of joining ESG scams and climate cartels and all that.

There's all sorts of theories about where ESG originated in the UN in a small really underfunded unit dominated by Aussies to be honest. you know the sort of the capture of where it was coined from is...

I didn't claim to have coined ESG till 2017 right? And my contribution as the head of the team was very much...

I viewed as I used to walk around with an umbrella, like keeping shit off the heads of the young team who are really bright. mean, some phenomenal brains, Gordon Haggit, someone who's not on LinkedIn, Philip Walker, James Gifford I've mentioned, all of these people, Trevor Bowden, Jacob Offit, they were paid nothing. A lot of them were interns or consultants, but super, super bright.

So I had my umbrella and I, as a tabloid journalist, changed the letters at the last minute.

Paul Clements Hunt (24:46.672)
that's where it started. had no idea that it would get traction and again I'll stop there because I'm hovering towards dementia obviously.

Adam (24:59.592)
Well, I liked the phrase ESG cartel. That was nice spin.

I haven't heard that used publicly. So that's good. That's good.

Paul Clements Hunt (25:07.738)
Look, have a look at, I'm not coming at this ideologically, I'm a bit of a left leaning greenie, but also a card carrying capitalist.

But you look at some of the stuff out of Rubio, that letter is easy accessible, it was remarkable. How do policy makers write to law firms, isn't that central planning, telling them how to manage risk? So we could go off on one, let me, I think we've got to get to property at some stage, is that right?

Adam (25:37.605)
Yeah, we'll get there in a minute. One topic I'm curious to sort of, well, not topic, we're on the topic, but I suppose one timeframe I'm curious to twist into is it was founded and coined 20 years ago today, well, this year.

What?

Paul Clements Hunt (25:39.41)
All right, no worries. I'm happy to.

Adam (26:00.252)
is happening globally now with ESG. if I suppose we can probably ignore the exact acronym of ESG, but the act, that activity and those behaviors, what sort of, from your perspective, you're obviously still very influential in the global space, with all of your networks that you're managing and working with and advising.

Paul Clements Hunt (26:06.714)
Yeah.

Adam (26:21.886)
How do you sort of see governments, investors, very large institutions globally? How has their thinking changed over time and where do you sort of see that heading moving forward at a global level?

Paul Clements Hunt (26:36.099)
I think in the 20 years the biggest singular factor is that people can now see, feel, smell, touch the risk.

And the way it manifests itself is obviously in climate. Whether you're in East Africa and it's six or seven years of low rains or you're in a beautiful German Bavarian village and your car's washed away or whatever. don't have to quote, there's so many examples.

Whether it's policy makers or actually forward-looking investors actually smell it and get it, wait a minute, something is happening.

I think, again, the boxing for the, put it into a box. I sometimes use this device of if you were born in 2000, by the time your early 20s you've had, may or may not have affected you, but you've had the global financial crash 2728.

then you had the long tail of that crash and social disturbance, you whether it's in Paris or Greece or whatever, you've got behind it, you've got the big rolling climate thing and destruction of forests. as a child and then a teenager growing up, that's why we're having generational change.

You've got these big risk events changing and then you step into, you know, a sort of novel zoonotic virus in the form of COVID and, you know, one of the connectors there is

man and nature living too close, whether it's the Wuhan fish market or bats in a cave, it's this idea that over the last 20 years, risks themselves have become manifest and the social inequality that, know, this is my 12th trip to Brazil in the last year, and it's both working with capital market actors but also working with activists in the favelas, right? So to close down to your question, I think...

what's become, you know, it's like a lightning rod and really COVID was a pivotal moment. It's like the world has changed. Things are happening that are real risk, which are manifest.

And, and that's part of the realization. Now have all asset managers and asset owners woken up to that? No, not by a long shot, but I think, I think the smartest quadrant are beginning to get.

Paul Clements Hunt (28:57.202)
the fact that unless they think about risk more holistically and at different levels, they're going to run a crop up. And then, you know, the gang will just don't give a toss and it's about, you know, it's about your bonus in January and, you know, maximizing return.

So again, it's a bit, I'm simplifying things a little bit and it's not criticizing anyone, you know, it's a, we're,

We're an interesting mob of about 8 billion people who will be 10 billion people by 2100. But unless policymakers and the biggest pools of capital get a grip, it's going to get mucky in the next few decades.

Adam (29:37.723)
I've got one last question before I pass back to Jordan, around ESG at a macro level with, suppose, the focus on backlash and it, yeah, there's, there's definitely been over the last couple of years, increase in ESG backlash. And we've heard people, pointing fingers that it's been funded by fossil fuel companies to destroy ESG.

But if, if the risks are financially material, surely anyone who's just not paying attention to them or refusing to accept them or publicly trying to slam them, that's a competitive disadvantage to themselves.

Paul Clements Hunt (30:19.878)
complicated and you know we could have a 15-hour session and just touch the edge of it but I think it's a really good question in that one of my pet theories is that because we you know just who takes notice of the UN really people get the Secretary General the vast parts of it people unless you've got a blue helmet knocking or there's some really horrible conflict so we we planted a seed in the investment chain which took

Paul Clements Hunt (30:49.17)
10, 15 years to really get traction. And one of the things there was the corporate lobbyists missed it. They completely missed ESG until about 2017, 2018, 2019.

know, fossil fuel lobbyists, and they are real. I've worked with them for three years, saw every facet that in the late 90s. They missed ESG going down the investment chain.

And then it suddenly sort of exploded. And people, you know, the people who used to kick S off.

CSR or SRI woke up to it and politicized it very quickly. And again, not to get too theoretical, we're in a time of huge change in terms of we had 270 years of extractive capitalism which benefited the G7, G20 nations and a chunk of humanity but not everybody.

We're now hitting that risk piece in the...

It's happening now and will last for the next 25 30 40 years Where we're trying to transform to I always say this from extractive capitalism to regenerative, right? Where it does begin to deal with social inequality? does begin to deal with those issues But we're right at the center of the storm now and there's there's lots of people, you know No one likes their lunch to be eaten. So you've got politicians and you've got business folk who will fight to the last

to say no it's not really happening this is nonsense but the the overriding proof and evidence in terms of just manifold and manifesting risks affecting us and the fragility of our market system of our just-in-time system COVID showed us that in terms of our supply chains or supply lines all those things so again to try and keep it to your question it's not about any acronym

It's not about any particular issue. It is about, it's about we are facing the reality of an extractive system which benefited, yeah, you know, we've seen lots of people raise from charity and life expectancy raise significantly and that's fantastic.

But that extractive system has used the atmosphere and it's used resources, you know, either as an open sewer or a free grab.

Paul Clements Hunt (33:10.444)
to get academic for a little while you go back to the economists of the 20s and the 30s right so Pigou Pigovian tax you look at the likes of Galbraith they'd nailed externalities both environmental and social and we just ignored them for a hundred years because it wasn't convenient for the the system that we have in the financial system and again I'm you know a card-carrying capitalist but in terms of extreme extractive capitalism which has benefited you know not a massive amount of humanity but enough

that's what's changing. I always offer one example. By 2050 the only continent on the planet growing population wise is Africa.

It's now about 1.4 billion. By 2050 it will be north of 2 and by 2100 it will be 4 billion. So between 2050 and 2100 Africa is the only place growing population wise.

one of my sort of, I guess,

measurement sticks for the 21st century. If we don't get Africa right with all its resources, all its minerals, all its demographic bounds, young populations, that's a huge headache for everybody. We're seeing the beginning of climate migration, the very beginning.

And I chaired a body across the hell after leaving the UN. So it reached Senegal to Djibouti, it's 11 countries, just below the Sahara, it's about food security. And that woke me up to...

the nature of the challenge in terms of migrants going north, Pope Francis a few years back, we don't want the Mediterranean to become a graveyard, this is only the beginning of it, right? Simply because of climate and all those issues and conflict.

So what we lack in some ways, and it's way beyond asset management and capital markets, is true statesmanship collectively through a multilateral system saying, wait a minute, you

The UN's not working, but we need to act multilaterally to begin to address these issues at every level of society and financial institutions and capital markets has to be part of that. I sound like a doomsday, don't I? I'm normally quite happy, but no, we've got some huge challenges ahead. The COP process, it took us 45 years through the GATT to negotiate.

Paul Clements Hunt (35:31.91)
the World Trade Organization which came in 1995 everyone says why is the COP taking so long? It's only been 30 years or 30 years next year right? History will view the COP very favorably because it's essentially trying to rewire political economy right? That's what it's trying to do and yeah it's a slugfest so let me leave it there Adam you know I think this is almost uneditable in terms of making it you know all together but anyway that's your job or your team's job or whoever's job.

Jordan Relfe (36:06.03)
Paul, think you were saying, the Doomsday piece, I think what's amazing about your insights is they're such a macro understanding globally, you know, bringing in such huge context and issues to what we see.

And I think we're, you know, focused and the industry is focused on its own sector, its own, its own industry, its own region. And it's really difficult to kind of pull yourself out of that and really think wider than that. And I think certainly from...

From the news recently, you're seeing globalisation is becoming less and less.

It's becoming more siloed. the presidency next year in the US is going to be focusing on tariffs and we've got conflicts that are creating energy insecurity and global insecurity. How do you see these massive global issues influencing real estate in kind of a pan-European space?

US base.

How do you see those things really influencing it?

Paul Clements Hunt (37:07.186)
We've just taken one super edge of space point that I can't resist making and then moving on to property. Look, it sounds like Noddy does history, right? Go back to 29, crash, rise of populism, new technology was the radio, war. So crash, new technology, radio, populism accelerates because as Galbraith said, ordinary people know when they've been rimmed, right? And then war.

Where are we now in nearly 100 years? 2007-08, crash, new technology, social media, populists are back out of the barracks polishing their boots and they really are, right? And we've got war again.

the mapping of that is too simplistic, but I think there is a point there. have a... Gal Braith wrote the history and impacts of the great crash of 29 in 1953.

And he was asked, why did you leave it so long? And he said, well, it was the shortest I could possibly do it.

It wasn't even a generation. the impacts of 2007, 2008 were reverberating still and we have no idea. So that's a macro point.

We forget history really, really quickly and nearly 100 years on, we are right back there. And it's different technologies, it's the same populism, it's the same crash and we've got, I think we haven't had so many wars operating, I think it's 70, 78 or plus.

That's a big macro point. To bring it to property at the macro level and then maybe we can dig down, it always amazes me that the cities and major centers of population in world only cover 2.5 % of the world's landmass, right? 2.5%.

And yet we know they generate construction, real estate, property, whether it's industrial, commercial, they do 70 % of the world's emissions. So in terms of

the macro piece around real estate and property. That's reality.

That's how we manage our real estate going forward. think part of the good news is, and this is what I'm sort of, it's through a carbon lens to start, but we can dig into the social side, is we've been obsessed by carbon offsets for the last.

Paul Clements Hunt (39:34.866)
20-30 years for all that good and bad and we needed them in voluntary carbon markets. But what we're seeing now is an incredible change in the last few months is that for the first time we're tradable carbon securities appear which have massive relevance to the real estate industry, right? So again, getting a bit nerdy, but to actually be seen as a security, you've got to pass the Howey test of the US, which is a four point test.

So the carbon markets...

are because big money folk and people who understand the real guts of the financial world. 1984, the International Swaps and Derivatives Association was created. In March of 2024, they started their first climate group.

What's that? That's a signal that we're moving from an era of voluntary carbon markets, carbon offsets, lack of credibility, to a multi-trillion dollar tradable market.

where property and the real estate sector need to be completely on top of that. You won't read about this. There's very little about it.

It's happening right now. Okay. So some of the first structures have been passed the Howie test.

Why is that important? Well, becoming a security, a carbon offset is booked as a liability on your balance sheet or in your portfolio, right? A security is booked as an asset. That changes the game. So in 2023, the voluntary carbon market's closed.

about three billion dollars of trades.

We know that to keep in touch with Paris, we've lost 1.5, but to keep in touch with two degrees, we need to trade a trillion dollars of carbon emissions a year. That means sovereign to sovereign trades. That means government to government or government to sub-government or government to corporate.

That's just been done in much abused, much criticized Azerbaijan. They delivered the key thing there.

to step back and Jordan maybe I'm running ahead of the question, but for real estate at the edge of space, that carbon place is becoming, it's shifting from being, hell we have to deal with it because of regulations to, we can make real money out of that if we're super smart in terms of your, you know, I mean the strict, the structured derivatives guys are now licking their lips because they've suddenly gone, yeah, you can monetize natural capital. You can monetize your emissions saving on

Paul Clements Hunt (42:01.03)
the aggregated properties.

That's all happening now.

Jordan Relfe (42:05.292)
And do you, interestingly, do you think that's driving, and it sort of comes back to that kind of materiality piece of actually, you know, when there's a financial gain or there's a, an element that is, drives the capitalism argument, you see that that's going to become a huge opportunity. It's only going to benefit society, benefit these macro plays in, in the, in the big scheme of things. I think there's a, go on.

Paul Clements Hunt (42:33.862)
Jordan totally, and it goes back to my own evolution in space, which is, you know, do I think there's a spiritual value to nature? Of course there is, right? You know, whether it's Antarctica or it's, you know, it's the forest of the Congo or it's the Amazon, whatever, you know, we, anyone who, anyone who hangs around in nature for a while knows that you can't price it and it's a massive spiritual component to it.

Tick. and but we've...

You know, we've we've haven't had a free feed freed for 270 years through extractive capitalism the only way to fix it Right. I think is through the use of markets and through the massive flow of funds and by showing people the upside your manager risk effectively But the upside of doing it properly.

So again, it's not property, but maybe an example Brazil which will hold the coke and this is carbon heavy, but you know, are talking about property and real estate

And know Brazil will host COP 30 next year in Belém, right? So There's a 27 Brazilian states There's a regulation in play that all of them have got to reforest with the natural forests on like 20 % Right of the state surface area When you're getting 30 cents two dollars four dollars in voluntary carbon markets for a ton of carbon

When Singapore, the government of Singapore is underpinning trades at $25 a ton, that completely trains it. So the ability to monitor, report, and verify your actual emissions avoidance and actually turn that into money, the game is completely changing. And to bring it back to property and real estate, it goes back to those figures.

70 % of emissions stem from real estate construction out of the world's...

of urban centers, it's not even getting close to infrastructure. So the money making possible in next 20-30 years, if you position right, and the markets go from being a few billion dollars, two trillions, and I think that will happen. So to come back to the point, we screwed up the planet with extractive economics, and last 50 years neoliberal economics was, you know, it's a crime.

Paul Clements Hunt (44:54.844)
But the only way to fix it so that in 2400 we can all wander around in cloaks and it's the spiritual value of nature and we don't have to value it is through the market.

I'm being a bit flippant there, but it is that balance of using the market to address the issues. Again, back to the economists of 20s and 30s, Pigou, Galbraith, these people, they nailed externalities as a huge risk that should be dealt with. And we're waking up to letting that just float for 100 years.

I'll stop there.

I hope it's related to...

Jordan Relfe (45:27.054)
Before I get Adam to go really Australian again and get really excited on some final topics, what kind of, mean, as you mentioned there, it's kind of carbon heavy and that's something that you sort of focused on there. Do you see kind of other big risks that are coming down the pike for real estate that actually are, know, something that really needs to be paid attention to? I've seen natural capital and biodiversity is...

fast becoming more important than carbon. Do you see anything else that's really on your radar?

Paul Clements Hunt (46:00.671)
I think the mega risk in and around real estate, particularly in the advanced economies, I'm talking specifically to the UK, is the stasis around regulation and policy making in the context of property.

That as it sits now, a lot of the, whether it's the planning regulations or it's specific safety stuff, that...

that will stand in the way of people making money in new ways and nature beneficial ways out of property and their portfolios, right? I mean, you I think at the beginning I work advising, 20 % of my time, I'm advising Mishkonde Raya, the UK law firm. And it's very interesting to see, you know, that the firm is typically about private wealth and high net worth and ultra high net worth families.

It's really interesting to see the battle between heavy planning and chaotic planning and regulation around land and real estate and property which has grown up over many decades and that being a block to new and innovative ways of thinking for property and real estate. So I won't spend too long on that because I think the question is broader.

think the, you know, if I took one specific example which would be, you know, Winder, sorry. wood framed buildings and that really innovative use of really really strong composites and those sorts of things. If you look at the insurance regulation around that and the question mark and the ability to begin to address those structures, you know, it's a massive block and it does it takes time to unwind regulation which is,

It's there for a reason but it might be there for a reason which was really solved 20 years ago but now we have new reasons.

If I came to the social dimension and let me maybe give it as an example. So look, one of the investors that I respect more than anybody else in the world is a man called John Oliphant who, maths genius, came out of the townships in South Africa, got a scholarship at Saint-Sixteen, know, just, I mean, pure...

Paul Clements Hunt (48:19.59)
I don't know if idiot savant is a compliment, but genius. He ended up going into the largest pension fund in Africa, which was the $138 billion government employees pension fund in South Africa when he was 26 as the actuary.

At 28 he was the CEO and he ran it on sustainability grounds for eight years. Why am I linking John to another dimension of real estate? Well, John...

you can edit this if you want, I don't think you should. John tried to stop Zoom and dipping in the pot and got his, not literally, but got his legs cut off by the political hierarchy in the South African context.

He left and he started his own firm. At the heart of that firm, one of their investment propositions is social housing in Africa, okay? And that takes you right into, if we look at the underserved, if we look at the...

the poor, if we look at people who don't have that basic thing of secure property, that's a massive issue, right? So we can sell, we can serve as many of the ultra high net worth people who live in Mayfair or Paris or whatever it is we want, but unless the real estate world understands and has structures which also begin to deliver on social housing, that's a massive systemic risk.

raising across many countries. again, maybe a footnote, so the law professor Paul Watchman who I, you know, he absolutely produced the legal work back in 2004-5 which underpinned DSG and all of that, he was 95 % finished on a text around property which arced from 1915, the Glasgow rent strikes, right, to...

2015 this was in the UK context but it was about the gap in the market and the provision of social housing and That that social housing should not just be provided by government, but it needed private players to provide decent social housing So again, what's my point you asked the question? I think the social housing piece is mega risk the natural instinct for I guess property and real estate on the residential side is you know the the seven the super elite

Paul Clements Hunt (50:46.994)
But, yeah, and the ESG lens on the social side would make you say, okay, we can make huge money out of that, but how do we address the social housing bit? What are the new products, structures, platforms that allow us to narrow the gap? And you both are based in London.

I came back to London in 2022 after 30 plus years away, Homelessness, I mean.

So again, maybe it's a tabloid colorful example, but I think it's a really good question, Jordan. And I think where it begins is the real estate and the property sector. You need leaders in that sector to think in a completely different way.

One of my, I guess, my sort of unrealistic dreams is that we take Paul Watchman's book, which was 95 % finished. was a massive legal but colorful text over 100 years, which basically said,

Where we were in 1915 with the Glasgow rent strikes is where we're heading now in 2022. So again, that should ask real questions for real estate, not about philanthropy, not about charity.

How do you serve all sections of the market at a price that can A, generate return and keep a market alive, but also address some of the social issues? I am sounding like Castro now. This is a disaster.

Adam (52:10.671)
I think that point Paul, considering serving all sections and points of the market. And I would say one thing that real estate companies don't do particularly well is looking upstream and downstream.

They'll look at obviously the assets and their immediate supply chain, but they won't necessarily look

upstream or downstream to where products and materials have been manufactured, made, and those supply chains, a simple one would be solar panels and where the materials have been mined from. And I would say a lot of, if we tracked materials globally, you would probably get to a source that's not terribly socially friendly or environmentally friendly in just...

Paul Clements Hunt (52:57.502)
Adam, you're going to get me started because the blended capital has been for six years on strategic minerals in the Sahel and Africa. So I completely hear you and get you.

It is one of those issues. Back to you. Sorry for interrupting.

Adam (53:10.228)
Yeah, no, no, no.

I think that we could do a podcast all in itself just on that topic, but I would say that is from our perspective, probably a particular blind spot in the real estate space is to tracking that and actively seeking to minimize and positively influence where possible and viable. I know if you, if you're doing a development in Mayfair in, in central London, you're obviously very far removed from where the materials are actually sourced and dug out of the ground. But I think a lot can be done to influence that through time.

We won't go into that topic. I'm mindful of your time today. No, go for it, go for it.

Paul Clements Hunt (53:44.594)
No, but look, I agree with that.

In terms of the real estate sector and both the asset owner and asset management component of real estate, I think, and back at UNEPFI, 2000, 2012, we had a really interesting real estate group looking at some of the fundamental issues. But to your point, I think… I think real estate has really underplayed its weight in terms of how it could drive and affect change. always, I mean God save me, I'm in post-cop traumatic stress syndrome recovery having been to, think my first cop was 98 and I've been to about 20.

I was always amazed that real estate just didn't show up. They weren't there. There's a few odds and ends of alliances and things now, but they just, they weren't there.

such a huge role and the ability to influence for good that I think real estate, you know, I try to think some of the big real estate conferences have been to over the years and it's like, it's almost like a very special cult, right?

and they all rock up in Monaco or the, I can't remember the name of the big gigs.

But if you're not part of the cult, and I think that's unhealthy, because I think the leaders in real estate should be asking bigger questions and they can drive the agenda because it's such...

thing which underpins all economies everywhere and I think real estate has been AWOL, it's been missing in the game. I think that is beginning to change now but that is an absolute criticism of real estate for thinking just how important their global role is and how they can influence the fundamental formation of policy.

Adam (55:14.882)
I think professional services firms as well. we, this is obviously my last question.

I'm super mindful of your time because we've run quite long, but it's, this is what happens when you have a fantastic conversation. But while we're on this point, think professional services firms have a huge, huge influence through the advice that they give and the outcomes of that from an ESG perspective. And we saw some of your research called Tracing the Dragon.

Adam (56:06.758)
looking at how professional service firms such as lawyers are influencing and have a very strong influence over the ESG outcomes of the clients that they're helping to direct and give strategic support to.

from that, would you want to give a very quick overview of that research that you did and just as a 10,000 foot response to how you think professional services firms should be

looking at the way their advice is delivered and how influential it actually is to effecting change.

Paul Clements Hunt (56:42.246)
Yeah, look, game on, can't resist it. the backstory to that is COVID, me and Watchman, the law professor I've mentioned, who we did the chasing the dragon, the riding the dragon, and the next one will be taming the dragon, right? We did that as an extension of a UN process, which delivered something called the Waterberg Declaration for investors, which no investor would sign. .

Okay, so why am I telling you that?.

One of the key things in that two pager was that the influence of accountants, lawyers, and professional services organizations consultancy have such disproportionate impact and control of the investment chain that they need to be looked at. So we thought we'd do a year on law, right, and then move on to the accountants, and then move on to the consultancies, you all the acronyms. And we never escaped from law.

I mean, was just, there was so much to do. And we, you know, we're still at it. So that's to say, yeah, look, I mean, in terms of the investment chain and beyond the investment chain, the influence of the lawyers, the accountants, the McKinsey's, the Boston Consulting Groups, the KPMG's, the Deloitte's, anyone and everyone is huge and quite often below the radar screen.

And that's where some really interesting gatekeepers to the real estate and property world hang out.

And I think there should be a little bit of a forensic light shone on some of them because in some ways...

Paul Clements Hunt (58:16.242)
I real estate owners and asset managers are only as good as the advice they get. And I would question whether the advice is as forward looking as it possibly could be. That is a thousand feet.

But yeah, water bag declaration. Not one investor would sign it at the end of COVID. I'll send it to you if you're interested.

Adam (58:40.946)
No, please do.

Please do. I think an interesting point on that is we do quite a lot of work with law firms actually in helping to educate them on ESG related risks that would have a material financial impact on their clients asset or portfolio performance. And a large focus of that is on a pre acquisition of an asset or portfolio is doing ESG related due diligence of that building to identify additional risks that I suppose a traditional surveying firm wouldn't necessarily consider who are less sophisticated around long term ESG related risks.

And then assessing that appraising what the additional CAPEX or OPEX requirements would be to rectify that and make it a resilient asset and then using that information in the negotiation process. while they're about to acquire it against the vendor who most of the time is completely unaware that those risks actually existed, which is obviously a negotiation leverage tool, which can be used, doesn't always get used, but a lot of the time it does. So it's just, we've been doing a lot of educational work and training work on helping conveyancing solidicitors.

understand what information they should be requesting, what happens if they don't get that information and how that can then be used in the negotiation process. then flip side that if one of their clients is going to sell an asset or a portfolio, what information they should be having in terms of evidence to support its ESG related performance and how resilient it's going to be moving forward. And if a buyer was a, I suppose, sophisticated advisor, like like what we would be advising people to do, then they have that information to evidence and support and justify that value that's being purchased and therefore hopefully not getting discounted.

So.

Paul Clements Hunt (01:00:41.284)
That's a huge offering and leverage to the market. if I go back to the chasing the dragon, the dragon was a 20 page pamphlet, right? The following year, riding the dragon, it's all a bit Bruce Lee, you know. We actually did in-depth analysis on 100 global law firms in terms of ESG and that generated 1200 pages of, you know,

Adam (01:00:44.713)
Yeah, well thank you.

Adam (01:00:56.524)
Lots of dragons.

Adam (01:01:08.405)
Wow.

Paul Clements Hunt (01:01:09.084)
combination of quantitative and qualitative research.

Yeah, there's a lot more spin and shine, right, in law than there should be around ESG. I think the model, the legal professional services model and the advisory piece, litigation's sort of no-brainer, that's kind of up. But to come back to your point, that type of specialist thinking and service that you've just described is at huge value and it is

understanding of the new risks, how to mitigate transfer and turn them into financial upside.

So you know the world is your oyster. I've forgotten what your company's called, could you tell me?

Adam (01:01:54.028)
That's nice that you're plugging this back to us on our own podcast, Life, Life Proven, the world's best ESG property company.

Paul Clements Hunt (01:01:57.21)
Yeah, no, what is it? What? What's it actually called? This is terrible. Life proven.

I can't look. What you just described is really, really wonderful, and it goes to the Waterbird Declaration in terms of the responsibility of professional services. So you can you can easily edit this out, which I'm sure you'll do, you know.

But no, that example is an absolute corker. And I hope.

Adam (01:02:04.308)
Life proven. That's great.

Adam (01:02:21.62)
No, stays in.

It's all good. It's all good stuff.

Paul Clements Hunt (01:02:27.218)
for your listeners, haven't stayed too far on the edge of space. it comes back to that.

Global cities, 2.5 % of the landmass. Real estate properties, 70 % of the emissions, it's 65 or 75, whatever, it's still a shed load. And the innovative thinking.

I come back to John Oliphant, a 28-year-old running a $138 billion fund out of South Africa.

you know, ability for someone like that to think beyond the normal return and to think about social housing and to think about those pillars, those are the sort of minds that we need to come to the floor, think, more in real estate. And again, that piece, where's real estate been in some of the big dialogues? Honestly, I think they are coming into the cop process on climate.


Paul Clements Hunt (01:03:24.476)
but there's UN habitat, those sorts of things. I'm a big defender and believer of the UN for all its imperfections, but unless real estate engages at a real influential policy level in the capital and in multilateral processes, I think they're missing a trick, and I think there's an open goal they complain to.

I'll it at that, Adam, Jordan, that was fun.

Adam (01:03:53.41)
Paul, this is my last question, which is a one word answer, or could be multiple words. As a man who's traveled everywhere, you've been everywhere, where is the best single location you've ever been stood? And you're like, this is it.

Paul Clements Hunt (01:03:59.622)
The answer is possibly.

Yeah.

Adam (01:04:12.226)
best spot on earth you've ever been.

Paul Clements Hunt (01:04:13.161)
I'm going to be greedy and I'm going to say the top end of Long Street in Cape Town on a Friday night if you're talking social. And the other place is where I haven't been yet.

So if you go back to the beginning of the interview, I became obsessed with Antarctica and in 91 I was heading off to join the Greenpeace boat down in Christchurch for six months on the ice.

And sometimes I use the fact that I am the world's least successful ever Antarctic explorer because I set out to the South Pole and landed in Bangkok and stayed there for seven years. So to answer your question, top end of Long Street, Friday night in Cape Town. I think the daddy's hotel is closed down now.

So that would be one place and the other place is where I've been in Antarctica. It's a bit of a cop out.

Adam (01:05:08.674)
Great answer.

Jordan Relfe (01:05:11.982)
and

Paul Clements Hunt (01:05:12.295)
So, set off for Antarctica, ended up in Bangkok. That is definitely the world's least successful Antarctic explorer.

Jordan Relfe (01:05:20.75)
sounds good.

I think. Interestingly, we started this this conversation by the joke that I was placing a bet with a horse at the beginning and I thought I'm going to just check and see a name of a horse that's actually one while we've been talking and there's one called realistic optimism and I was like, do you know what that perfectly sums up how you presented this and I was thinking we should have had a we should have paused put a bet on that and go and see what happens but Paul, think it's it's been

Adam (01:05:21.152)
Over to Jordan to sign us off.

Paul Clements Hunt (01:05:22.097)
Perfect.

Paul Clements Hunt (01:05:30.8)
Yeah.

Paul Clements Hunt (01:05:44.747)
Thank

Paul Clements Hunt (01:05:48.73)
Was it 16, 21, what was it?

Jordan Relfe (01:05:49.738)
It has been really realistic optimism from you and it's been, you know, really frank words. think you've been amazing at kind of presenting to us that, as you said, edge of space view on how people need to be thinking.

And it's really important to certainly real estate to extract themselves away from, you know, their narrow silo and really think about the wider piece. And that's been absolutely epic from you. I think thank you so much.

Paul Clements Hunt (01:06:14.916)
game on.

Look, really enjoyed it and yeah, happy to do it in a year's time and you know, maybe I'll be in Antarctica by then and I can, but I love that realistic, realistic optimism. What were the odds? you just...

Adam (01:06:26.492)
Hehehehehe

Jordan Relfe (01:06:29.134)
Realistic options. Four to one, four to one.

There was another one that I reckon I probably would have gone with this. was, don't worry, we've got this. And that was 250 to one.

Maybe those odds were a little bit, a little bit, a bit long, but yeah. We'll go with you, with you Paul. Four to one.

Yeah, but don't worry, we got it.

Adam (01:06:32.994)
Strong odds.

Paul Clements Hunt (01:06:33.251)
Adam (01:06:40.404)
Hmm. But don't worry, we've got this. Don't worry about those odds, we got this.

Paul Clements Hunt (01:06:44.082)
Yeah, that's good.

Okay, guys, listen, that was a real pleasure. I've got to go and see an outfit now called Espirito Action, sorry, so Espirito Santo M.A.S.S.O., which is an incredible body. It looks like an industry association, but it was a group of business leaders who back in 2003 wrestled their state back.

from two very corrupt, dodgy, real politicians.

So Espirito Santo is a small state on the Atlantic coast, and it's the most phenomenal example of business rolling up their sleeves and actually capturing the state back from a couple of corrupt players. And in less than a generation, they are fifth in the human development index in Brazil and AAA plus in the Brazilian treasury, and that's about governance.

Boom. I'll leave it at that.

Nice job. Thanks guys. Gotta go.

Jordan Relfe (01:07:42.286)
Amazing.

Nice mic drop. Thank you, Paul. Take care..