Africa outlook post COP28 (part II): Transcript

Transcript

Host: Hello everyone and welcome to the second episode of our ESG and Sustainability Unpacked podcast. We've done one before; please look out for that as it includes our post COP28 series where we talked about the outcome of COP28 which happened in December. But this year we need to see how this [COP28] applies to our daily lives and what subsequent years will look like. 

I’m your host, Marilyn Obaisa-Osula. I head the ESG and Sustainability practice at PwC Nigeria. And I have very power packed guests with me to discuss this. We will not only be discussing the post COP28 series, but we'll also be discussing the 54th World Economic Forum Annual Meeting that happened at Davos–because climate change and issues around sustainability were also discussed.

With me today are our distinguished guests. First on the list is Omobolanle Adekoya. She is a Partner and Head Capital Markets, Accounting Advisory and Corporate Reporting Services at PwC [Nigeria]. She also leads the ESG platform, and she's on our African Leadership team.  It's an exciting time to speak with her on finance. 

Then we also have on the list as my guest, Dr. Godswill Ihetu, the former NNPC Group Executive Director (GED) and the former Managing Director (MD) Nigeria LNG. And also on the call, Olufemi Osinubi, Partner and Technology Consulting Advisory Leader of PwC Nigeria

So as you can tell, we'll be talking about these implications for Nigeria in three perspectives; we're looking at finance, technology, and energy

Thank you so much, Bolanle for joining this call, and we look forward to learning from you on the emerging issues on finance, climate and sustainability. The COP28 has come and gone, and there was a lot of discussion that happened there. In your view, what are the implications of these discussions? How do you advise us as a nation, and as a corporation? Thank you. Over to you, Bolanle.

Bolanle: Thank you, Marilyn. and I'm glad to be here. You would have heard quite a few similar themes that came up from the COP28, as well as the recently concluded 2024 World Economic Forum in Davos. With key takeaways like: building trust, building a new growth model in uncertain times, looking at things like global cooperation, the use of technology to to deal with the data that we need–like artificial intelligence (AI).

But the truth about it is, to be able to move the needle in climate change, the gap between making it a reality and those opportunities, is finance. And that's why the financial institutions have to play a very key and central role in this. And being able to balance their returns versus what is needed to be able to save the environment. So there are three key activities I'll say that's required to make this happen. The first one is understanding, the second one is collaboration, and the third one is scaling up. 

Let's talk about understanding. When we're talking about understanding, a lot of financial institutions (FI) have challenges in looking around, measuring and monitoring emissions. So  you look at Scope 1, Scope 2, Scope 3 emissions, and what it means for them. And even when it comes to things like climate-related-lending, to be able to know how to price products, price insurance products, make the right investment, being able to balance and align their portfolios etc. Actually, in Nigeria, because we don't have the sophistication, a lot of data is needed to be able to understand the potential return on investment. 

They must also understand the fact that it's a long game, some of the challenges they even have with agriculture–we haven't even scaled that yet talk less of climate change, but something like that needs to happen.

In addition with understanding, FIs should also capitalise on the initiatives introduced in COP28—things like the net zero data, public utility etc. It will help bridge that gap between what's happening with the private sector and climate transition. And when you think about the transition from fossil fuels—which we’re quite depending on locally—to renewable energy, hydro gas, Nigeria has a lot of gas, yet how do we balance the need for revenue versus our energy needs? Because we do have a lot of energy needs that we haven't met yet. FIs also need to understand that funding is required for the research and development (R&D) that we need, because without it, we can't move the needle.

The next one is around collaboration. So what is collaboration? Collaboration will help to build the trust that we talk about amongst government, policy makers, private sector versus public sector. There are quite a few stakeholders. People talk about decarbonisation, but how do we make this happen? How can we come together? Because we will need special products to be able to reduce credit risk, create funds to help with long term initiatives—maybe even help with government incentives, being able to consult on it and look at the priorities that require workable solutions. There are quite a number of things that we talked about at the COP28, around the industrial transition accelerator, things around the global decarbonisation accelerator etc. 

These are things that we as a nation can do and collaborate together so that we are actually accountable to making sure we don't pass that 1.5° goal that we always hear about. And even looking at regulatory interventions that may be required, to be able to chapter the growth that's needed. 

The last area is about scaling up. For it to make sense, we need to scale up. So it might mean coming together, coming up with things like the bond, collecting investment schemes, helping with climate finance. So many developments are happening, then how do you look at infrastructure that's needed as well as help with commodities? Because it will have ripple effects.

I'm sure a lot of you have heard the news about food shortages that we have in Nigeria, but we must move that needle. And the financial institutions have a very key role there. Above all of these, we also need to be able to report; we need our people to report. The Developing Finance  institutions (DFIs)  are also there to help. We can also learn from other countries; what's happening in Scandinavia, Indonesia etc. But we must be able to report and be transparent. 

We must look at the International Sustainability Standards Board (ISSB), IFRS S1 and S2 standards as a baseline. So for us to be able to report appropriately, there must be data available, data governance, and as I mentioned earlier, technology. So I'm happy that Femi is here to talk about technology because technology will be there to sort of help us as well. Thank you, Marilyn. 

Host: All right. Thank you so much, Bolanle, for taking us through the finance aspect of things. Like I said at the beginning, we are going to go through post COP28 and the 54th World Economic Forum at Davos conversation, looking at it in three lenses: finance, technology and energy for the Nigerian landscape. 

Thank you for also mentioning technology being one of the key things that investors will be looking at, especially as technology helps to scale up innovation. With us today is no other than the Partner and Head of our Technology Consulting and Advisory Head, who has very deep experience in technology and in emerging issues as well.

Femi, thank you for coming to this podcast. I just have a few questions for you. What are your thoughts on integration of technology, across various sectors? And how do you see this playing out, post COP28 and the discussion in Davos? And how do you relate this to the Nigerian landscape—helping businesses know how to align their sustainability ambitions with technology? Thank you. Over to you, Femi. 

Femi: Thank you and Marilyn. Thanks for bringing me to this podcast session and thanks to Bolanle for starting the discussion around technology. I strongly believe that emerging tech has a role to play in our lives, especially during these difficult times globally. Just focusing on COP28, we've made several technology initiatives (isolating climate action). And I’ll mention a few of these initiatives. 

The first is actually what we call the Utilities for Net Zero Alliance (UNEZA) led by the high-level champions. These initiatives actually brought together about thirty-one partners, including global utilities and power companies committed to advanced electrification, renewables-ready grids, and clean energy deployment aligning with the 2030 Breakthrough goals. And it was actually an action plan declared by the global power utilities to drive energy transition at COP28.

Another one is AI. AI is really at the forefront of everything. And maybe it's a coincidence—I'm actually speaking tomorrow at an AI Nigeria event here so AI is key. And I had a session with Microsoft about three weeks ago, where we engaged in AI. So there is really nothing that we are doing now that AI is not a very important topic that needs to be discussed. 

At the COP28, there was an AI innovation Grand Challenge launched by the UN Climate Change Technology Executive Committee (TEC) together with Enterprise Neurosystem. The initiative was launched  to identify and support the development of AI-powered solutions for climate change in developing countries. The focus is on areas like disasters reduction, sustainable agriculture and climate resilience infrastructure. Again, the challenge launched at COP28 and I was so amazed at the climate action in developing countries. 

And I think even if you look at the situation we are in Nigeria today— and a lot of countries in Africa, and even globally—high inflation, challenges around food insecurity etc. AI has got a big role to play to reduce all these issues around agriculture, to enable awareness of sustainable agriculture. 

One thing I will mention again is around technology and innovation. There was a space dedicated at COP28 to showcasing cutting-edge climate technologies, where they brought innovators, investors and policy makers together and that all actually was panel discussions, workshops and demonstrations on various technology solutions.

So there is so much around technology which was really discussed and witnessed at COP28. COP28 actually emphasises the need for specific technology developments around the agriculture industry. If you look at the industry technologies for improving energy efficiency and reducing industrial emissions. With transportation,we can see electric vehicles, green shipping, and sustainable aviation. So lots of things around sustainable development, sustainable agriculture, various sectors were actually emphasised at COP28.

But let's look at some of the implications briefly. One is actually around some of the actions that will be accelerated which I will call accelerated actions. Technology was recognised as a crucial driver for speeding up the pace of climate action across all sectors. Initiatives like the AI innovation Grand Challenge which I mentioned earlier. Their aim is to develop and deploy solutions for renewables, emissions reduction and climate-facing things, pushing countries closer to meeting the Paris Agreement goals 

Another one is adaptation, which is actually around technology advancement, early systems, climate resilience, infrastructure, and innovative water management solutions. So there are lots of solutions being deployed, focused on climate change, focused on sustainability. Again, using  technology to improve efficiency and effectiveness. So technologies like AI, as I mentioned, almost every conversation now is on technology is around AI. AI can optimise energy management, reduce waste and increase the efficiency of climate interventions. So this leads to better utilisation of resources, and potentially lower costs associated with achieving climate goals.

Another way to look at it is around the new market opportunities that climate change would actually create. So the focus on clean energies opens up substantial opportunities for businesses. Developing, manufacturing and implementing these solutions can drive economic growth and create jobs, particularly with renewable energy, construction and sustainability and sustainable transportation sectors. 

What are the opportunities for Nigeria? A couple opportunities in Nigeria or for Nigeria are investments and jobs. Nigeria stands to benefit from increased global investments, including technologies. There can be a lot of recycling developments within the country, creating new jobs in sectors like renewable energy, sustainable agriculture and climate resilience. Market assessments as well enhance climate resilience.

Technology can also improve Nigeria's sustenance to climate change. Impacts like droughts, floods and rising sea levels. This week in February, it was very unusual in Nigeria to see heavy rain and floods. That's as a result of climate change but we can actually use technology to detect, to really prepare for all these floods that are bound to happen in this age. 

And the final thing I would say is that it actually improved energy access. Clean energy, clean technology advancements or renewables and energy storage can also address Nigeria's energy and access challenges by providing reliable and affordable power to our communities and reducing dispensable or dependence on fossil fuels. 

Thanks Marilyn, I think I will pause here for the moment.

Host: Thank you so much Femi for all that insight you provided on technology and how technology is helping us deal with climate change, and how the risks and opportunities are emerging in that space. 

It's a good one moving from finance to technology and now to energy. I think we want to know how the energy sector should be looking at this. We have someone with us who has spent a good number of years in the energy sector in our country, NIgeria. Doc., over to you. 

Just tell us about technology and how you see technology, risk, and opportunities. What is your advice? What would you advise businesses and government in this just energy transition that is inevitable?

Dr. Goodwill: Thank you. I can see a kind of huge opportunity in the transition to clean energy. The oil and gas sector is a major contributor to climate change and the industry has accepted it after so many years of denial, and right now, the industry is trying to decarbonise. 

Decarbonisation is a very wide field, and that industry is doing a number of things in this respect. But I think the one that everybody hears about these days is carbon capture technologies, where oil and gas companies are making a lot of investments in technologies that will remove carbon from their operations. We don't have time to go into all the details of that. But what we know is that the oil and gas companies are taking this seriously. Although some commentators feel that they're not doing enough, that they are carrying on business as usual, because oil and gas production has not yet diminished, that they are still investing. 

But the point here is that there are technologies that are being applied to reduce emissions. In Nigeria for example, at the last COP28, we declared that we are going to eliminate gas flaring, which emits a lot of carbon dioxide into the environment. And I think it's good to know that just recently, Total Nigeria has announced that they've been able to remove all flaring in their onshore facilities, which is a major achievement. And it will take quite an effort to be able to do that throughout the oil industry in Nigeria. 

The opportunities are there for the oil and gas companies in the renewable sector. Some of them are already investing in that sector; solar, wind, hybrid—clean energy sources. And the advice to organisations is that they should take climate change seriously. For ESG climate change issues are important, and they should begin to see how they can collaborate and be able to appreciate the issues of sustainability in their business, because climate change impacts every sector in the current state of the planet. 

The planet is going electric in order to have clean energy and It's all about electricity generation. That is how we can ensure that we have clean energy and that we are able to adhere to the zero emission targets of 2050. 

Governments have to take the issue of climate change seriously. And how do they do that? I think it's back to the financial institutions. Government should be able to stimulate action among the financial institutions, identify where funding is required because renewable energy will need funding. Renewable energy has not really started to make profit to be able to expand its own facilities and make profits and invest. Unlike the fossil fuel sector where they're making good profit and are able to expand the operation without necessarily looking for financing elsewhere. But for renewable energy, a lot of money is required, and governments have to look for collaboration. 

In Nigeria, there are European Union countries that have provided funding or have promised funding. There is also our own Bank of Industry (BOI) that’s involved. So the government should be able to promote or support all these initiatives, even if they are not putting money in them, but be able to stimulate investments in these areas. For Nigeria, in particular, where we have our energy transition plan which ties into electricity and other renewable sources. I think that plan needs to be followed up very seriously. There is a tendency that in Nigeria we make a plan, it becomes just a document left somewhere. But I think this is very important. The way things are going, we are all feeling the heat even this week. We know that climate change is no longer something that's to be debated about, it is real and it is here with us. 

Technology is important, investments are important, governments and financial institutions are important, collaboration is very important, It's not something that can be left to one sector. Corporations like PwC have opportunities to pick up work in this area. 

Host: Thank you, Doctor. You have spoken a lot. You've spoken through some of the things that Bolanle had spoken about in finance. You’ve also spoken through some of the things that Femi had spoken about in terms of technology. The others also spoke to the sector you're very familiar with, which is the energy sector, which is actually driving most of the narrative around climate change. 

One key thing is that we have a lot of competition for energy supply, because we have hydrogen, the likes of solar, wind, so many competitions. So I see the price falling in the next few years. And I think this is something that businesses and governments should begin to look at to diversify their portfolio. What are your thoughts on that?

Dr. Goodwill: Thank you. My thoughts are very simple. Today, what the world needs is energy security, energy security is key. How do you ensure energy security? At the moment the world is relying on fossil fuels and a lot of renewables are coming in. But the challenge is, how do we ensure that renewables are going to be able to fill the space that the fossil fuel industry is going to drop. As renewables go up, how do we make sure that the world has enough energy that is secure? The renewables should be able to cope with the gaps that will be created by the reduction of oil. 

Host: Thank you. Doctor. I'm going to take that as your final thoughts. You have elaborated as much as possible within the time that we have for this. There's a lot to discuss about this topic, but just to have this conversation.

Thank you so much everyone for your conversation, the inputs, insights from your various perspectives, to see that ESG actually translates into all professions, all job descriptions. it's growing, I dare call it an octopus. 

Bolanle, I need to ask you, what are your final thoughts to organisations in Nigeria and the public sector players? 

Bolanle: There are a few things I want to say. The first one is that it's everybody's responsibility. A lot of times, when we're speaking to FIs and other stakeholders, everyone blames the other, or everyone is sort of busy looking at how to look good. But the fact is that we need to be able to grow sustainable businesses. I mean business strategy, sustainable strategy and climate is one of them. A lot of us don't realise that there's actually a ripple effect in there. It’s everyone's responsibility and people need to go all in to make it work. 

And finance, as I said. Without that, it's very difficult to do things. And you can come together and work together. Everyone has something that everyone needs to be able to come together and collaborate, and actually make the transition as required for the sake of our environments. 

Host: Thank you. I really like the fact that you talked about the massive ripple effects. I wish we had time to run through even just one ripple effect across one sector. I think it really makes sense, but with the energy sector, that's very key. All right. 

Femi thank you once again, but I would like to ask you, what are your thoughts? They've just released the recent IFRS ISSBS and people are panicking. What do you think technology can do to support this move in terms of reporting, data and all that? And with this, we would like you to use this as your final thoughts

Femi: Thank you so much Marilyn and Bolanle as well. I think this is an area that Bolanle is so passionate about around what's happening in that space

I believe technology can be of use to build trust in investors. And in what way? By improving on  data management and reporting. The nature of sustainability reports, being non-financial, puts a veil on the transparency of sustainability reports with investors. This veil has been tackled with the launch of IFRS ISSB S1 and S2. However, it requires data automation to drive the value. This means that ESG will need data capturing and enterprise systems, such as ERPs, CRMs, and any other systems to ensure compliance with the ISSB S1 and S2. And I'm aware that a lot of the global audience, like Oracle, Microsoft, SAP and even IFS are working to integrate sustainability into their solutions so it enables easier reports and automation and going forward. Thank you.

Host: Thank you for that closing remark. We've come to the end of our two-parts post-COP28 series, and we look forward to you joining us at our monthly fire charts podcast where we will be discussing different topics around ESG risk assessment, carbon emissions, carbon credit eligibility, tax transparency reporting, carbon tax, tax initiatives around going green, solar energy, energy in general, ESG audit and assessment, governance, breaking ESG into E, the S, and the G. 

Just like technology, ESG is going to be an enabler of innovation. ESG is also an enabler that will make our businesses sustainable, our lives easier, our world a better place for us now and our future generation.