MIAMI: The public sector should lead the way in supporting the financial costs of the energy transition, said Samir Assaf, chairman of HSBC Middle East and North Africa.
During the FII conference in Miami, Assaf argued that public institutions around the world should follow the example of the Public Investment Fund, or PIF, the Kingdom’s sovereign wealth fund, when it came to supporting the initial losses that could occur in making these kinds of investments.
“I think that PIF is giving us a great example through the loss of equity investment they are doing in hydrogen or in NEOM,” Assaf said.
“When you think about the reform that is happening, or will happen at the World Bank, the essence of this reform is to make sure that the World Bank is deploying more toward the energy transition and taking more of the primary risk to support (the) financing of this energy transition.
“In my view 60, 70, 75 percent of the risk of the equity should come from the public sector,” he said.
Assaf said that although banks maintained a key position in financing activities aimed at achieving net zero in 2050, “the reality is that we are all in this journey together and everyone is in this role, and I really have a call to public money to come and be the first loss of this transition.”
At the panel, speakers pointed to the urgency of accelerating the transition to green energy, reducing greenhouse gas emissions and prioritizing more resilient infrastructure in vulnerable communities.
The focus was on low and zero carbon technologies that would drive opportunities for investors, including capturing and removing carbon, carbon neutralization and scaling up solutions such as green hydrogen and sustainable aviation fuel.
“There’s a lot of money right now that’s positioned to go after technologies that may or may not be able to solve that problem in an adequate way,” said Steve Shallenberger, CEO of environmental technologies company, Rivotto.
“As a collective, we are at a very serious inflection point where we have to make the right decisions” to avoid “putting financial burdens and hand over an Earth that’s not suitable for future generations.”
During the panel discussion, participants also talked about the responsibility of the Global North in financing the transition toward green energy.
The general consensus among speakers was that the deployment of new technologies and the scaling up of those technologies would happen in the north, where the current competence sits, and the deployment of those technologies at scale would happen in the Global South.
The speakers added that the rollout would represent “a very interesting opportunity” for countries in the southern hemisphere to generate long-term attractive returns.
“The R&D (research and development), the proof of concept and the commercial scaling up, that is likely to happen in the North,” said Assaf.
“But the deployment of those technologies at scale is going to happen in the Global South. And that’s where the opportunity is.”
In a separate panel, NEOM’s Deputy CEO Rayan Fayez also stressed the importance of harnessing the opportunity offered by these projects to create long-term sustainable capital, while at the same time creating an impact on the rest of the world.
“It’s a balanced approach between economic development and economic returns, but at the same time creating impact that goes beyond projects like NEOM,” Fayez said. “We’re trying to redefine how businesses coexist with nature.”
“We’re addressing livability challenges and you’ve seen some designs of The Line. What we’re doing is redesigning how people could live better in the future with less infrastructure, with less footprint to occupy, with better proximity, no cars, no CO2 emissions,” he said.
“All of that coming together is creating an ecosystem where we are solving challenges that have existed all around the world but people have not had the chance of having a blank canvas in the way we do, the vision, and the way our chairman does, to recreate it and experiment with it at scale like we are in NEOM.”