Baker & McKenzie Global Business Challenges - Leadership Series

So the first thing I'm going to do is just draw out where we are with this legislation.  It's been a long time coming but this is a contribution by Australia to a debate that is now in desperate need of some momentum.  With the climate change issue having dropped down the agenda of many nations, not least those who are facing very severe sovereign debt crises and impending recession, and Europe which has been out in front certainly in terms of legislation but a price on carbon and is very preoccupied with these near term financial issues with a real risk that the institutions that have been the main guardians of this legislation are really under pressure.

I'm going to come back and describe I hope very accurately why their troubles with the euro are not the same as those that the European Commission has in maintaining the value of the Emissions Trading System, but in political terms, the decline of the climate change issue from the top of the agenda and the substitution of sovereign debt issues is making it extremely hard, not least for a business called Climate Change Capital where capital flow and climate change as policies are rather essential to our success.

It's obvious that the problem is so dispersed, so large in scale, so dependent upon decision making all over the world that no country can look after its national interest without cooperation with others.  And the key sentiment that we should take away from this legislative intervention this week is that Australia's national interest is now better protected because it has legislated domestically not for what takes place within its borders but because of what it encourages others to do.  If you have a collective action problem, the last thing you do is nothing.  You have to have others solve your problem for you and you need to build the goodwill for that. If you legislate in a meaningful way, you create a price on carbon, that's just one of the ways, we happen to think it's an intelligent way of responding to the risk, you increase the likelihood that you can build that goodwill to others so that they deliver the national interest in reducing the risk from climate change.  And if you look up and down the time zone in the Pacific Rim you will see other countries and sub-federal states doing exactly what Australia is doing, and that's a really important diplomatic and economic relationship to develop with obvious countries such as Korea and Japan and sub-federal states like California and the provinces that will be trialling carbon pricing in China over the next few years.  Those relationships are fundamental.

And I thought because you all know how the political discourse has been here in the past and I do think it's a very important moment for recording who said what in this process.  There should be a period of shaming now.  There really should.  The environment movement has got to be hard about this.  Those people who have stood on platforms whether they be political or economic, and of course they were blended with the opposition to the legislation, have got to be called to account.  There was a hysterical overreaction to carbon pricing amongst the resource community here, and the natural tendency of media to polarise, matched with the way politics is here at the moment has meant that we have very little sensible coherent argumentation about how Australia's economy will continue to grow through the export of resources and at the same time a very large marketplace is opening up for resource efficiency technologies and business know-how as well as the direct alternatives to fossil fuels.  And I just thought I would share with you something I've discussed with my team.  One indicator of the scale of the marketplace available to Australia that at the same time is a major importer of Australian fossil fuels and other mineral resources which is China, and just to compare that leadership rhetoric of Wen Jiabao with the rhetoric you have seen emerge out of the opposition here and the resource industry.

So these are little clips from a speech made by Wen Jiabao at the World Economic Forum in Dalian on the 14th of September.  So the first thing, all journalists get this, look at the amount of space that has been taken by the themes that many of us have worked on for many years, so environment, climate change, resource efficiency themes in the speech, but also look at the amount of language.  And language is all we've got.  If we're trying to build a large cooperative effort to solve a collective action problem, language is all we've got.

So the first thing is that Wen Jiabao chooses to link his speech - and his speeches are very carefully crafted, there's nothing off the cuff about them - with a theme that the World Economic Forum has brought forward after lots of internalising of debate, called 'Quality Growth', so the phrase, the theme of the meeting was Mastering Quality Growth, coding that obviously.  So Wen Jiabao says, 'Mastering quality growth represents people's shared desire for a robust, sustainable and balanced economic growth' -he chose those words, those were not World Economic Forum words, he chose those words.  He then goes on to deal with some of the problems that China is facing with the high-speed growth and how that's causing alarm and social unrest and needs to be managed.  And then there's a whole section, you know, his speeches are not very long, there's a whole section that picks up these themes, and just think about how these words are combined and what a difference it is to the way the debate has been polarised here about carbon pricing, environment versus economy.  So he says this - you can imagine how these speeches are, the tone of voice, and there's something about Communist Party speeches that can amuse but don't underestimate the seriousness of intent - 'We will vigorously develop strategic emerging industries with a focus at this stage on industries related to...' - and what's the first one out of the block? - '...industries related to energy conservation, environmental protection,' and then 'new generation information technology, biotechnology, high-end equipment manufacturing, new energy, new materials and new energy vehicles'.  You just think, that cluster is compiled carefully.  Look at the order, look at how many in there relate to environment and resource efficiency.  And there's a whole chunk of the speech which I'll just skim through because you'll pick up the code very, very quickly, 'China will continue to save resources and protect the environment, follow the path of green low-carbon and sustainable development, use resources in a more efficient way, develop a stronger capacity for tackling climate change' all in one sentence, not separated out, no dismissal of the climate change issue and delivery of some other economic objective in contra distinction to it, '...to conserve resources and protect the environment is crucial to achieving sustainable development...' and this is one of China's basic state policies.  That's the marketplace into which Australia sells raw materials as well a potentially the place in which you could sell technologies.  'We will speed out the building of the industrial structure and mode of production and mode of consumption and conduces to resource conservation and environmental protection and from harmony between nature and man.'  The whole section goes on then to describe the five-year plan, the targets for reducing energy consumption and CO2 emission per unit of GDP.  And it concludes '...we will promote circular economy, develop low carbon industrial construction and transportation systems, promote energy, water, land and material conservation and integrated resource utilisation, preserve and repair the ecosystem, increase forest carbon sinks and build a stronger capacity for tackling climate change'.  That's Australia's major trading in the region.

So the basic proposition I'm trying to communicate out here is that the carbon pricing legislation will do almost nothing to shut off the demand for Australia's high carbon exports, but at the same time, at the very same time, you will have the largest natural hedge in history - to take value associated with high carbon exports in assets owned here and through carbon pricing, rationally, carefully allocate away from high towards low carbon into a real marketplace created by your nearer trading partners who want resource efficiency, environmental technology and to tackle climate change in a meaningful way.  You will not get economic decline because of a carbon price, you will get continued export demand for high carbon plus an opportunity to sell into resource efficiency which will keep those high carbon markets going for a while, because if they get really severe, everybody knows what happens when you have price spikes, people find alternatives very quickly.

Now, you may have noticed that minerals stocks went up the day that the carbon legislation came into place, so it can't have been all damaging to Australian business to have a carbon price, but it also tells you that the industry has been preparing for this for many years and their investors knew it was coming or at least thought very likely that it was coming - so we're ready.  Now of course we have to take this price and use it to build innovation here in the technologies that will produce real results in managing that price at home and also in neighbouring countries where trade hopefully will develop around emission reduction investments and it's also the case that the Australian SuperFund Industry now has every opportunity to sit down and grapple with what a price for carbon means, not least because of its heavy dependence upon the ASX which is a high carbon index, and where with the new Clean Energy Finance Corporation there's a tremendous opportunity to work with that institution to find a way to deploy very large amounts of capital here in infrastructure and indeed in innovation that will produce a financial return associated with managing the high price for carbon which will develop over the next few years.

I hope the new leadership of the Clean Energy Finance Corporation just spends time with the SuperFund industry figuring out what's in their interests, what type of financial product do they want in order to manage their long term liabilities to their beneficiaries in order to diversity away from the ASX to some extent, what kind of financial product works, what could we develop together, CEFC and the SuperFund Industry to find common cause in delivering a clean energy future for Australia.  That of course extends outside Australia too.

As it happens, also in this speech, there's a very clear indicator that China wants to put as much outside China in investment terms as is being imported into China. They are wanting to take their investments out.  What better relationship to develop than take it out and to invest here in a clean energy future?  That dialogue will be a long-run dialogue but the diplomatic means available to Australia should be used now to ensure that these commitments made internally in China match their desire to put money outside China and meet Australia's new legislative framework for a clean energy future.  Just think of that strategic partnership, it would be profound, it would be transformative, and it can be replicated in Korea.  And if you look across to the other side of the Pacific to places like Mexico and Chile who are also developing carbon regimes, and California, now you can see something meaningful that could emerge over the next decades to make this a really successful resource-efficient economy, which Australia has not had to deal with because of the widespread availability of these resources at low cost that frankly the population has been spoilt by low energy prices.  But when you look at what China and the major trading partners need from Australia, it's both those resources and the means to make them go further, to get more out of less, and that's a tremendous challenge which Australia, I believe has the intellectual capacity and the strength of will to respond to.  One of the things that most disappoints me about the way this debate has developed here is the lack of confidence that the opposition clearly seems to have in the Australian people.  I find that just alarmingly defeatist and I see a much stronger spirit in the nation to deal with these issues, because they are difficult.

Now, let me conclude with some things that I've been testing out with people in our conversation in the last week and then maybe I'll open up some thoughts for questions.  The conservation movement here and the environment movement more generally has made arguments that are now accepted in this legislation.  Here, I think a good job has been done to connect green politics with financial thinking, at least in the sense of these institutions that are being created.  But this problem is so complex, the interests that are affected are so numerous that the polarised environment we've been in will never be successful at solving these problems.  So I'm interested in what kind of alliances of interest could emerge now with a little bit of confidence coming from a win that the environment movement, the conservation movement might explore.  Obviously top of the list are all those who have put all the effort into constructing this carbon regime here.  Now they're allies, whether they be investors or lawyers or consultants of one kind or another, engineers in particular who have got the technical capacity to turn this price signal into a business value.

But more than that we've got to look for some unlikely alliances.  I happen to think that in agriculture, a constituency which the opposition coalition has looked to to frighten and scare and make opposition to, that there's tremendous opportunity in sustainable agriculture in revaluing land because it's so capable of generating renewable energy because in the conservation of water you're building resilience to climate change and because we have technology now that can manage to measure soil carbon at the same time as atmospheric conditions to time the irrigation and the use of fertiliser to improve productivity in land that the energy-water-food nexus is real, it's profound, it affects people in a material way and they know it, and so far it's not been connected to the climate change and carbon debate.  It could be, and I think it's a really vital area for building new relationships or rebuilding relationships with those who are stewards of the land.

Another example I mentioned the other day with Martijn Wilder I know he likes is the defence industry, not the natural ally of the environment movement.  But the defence industry is in a seriously difficult situation with its sole client reducing by large amounts the capital, the money available to buy equipment.  This is particularly the case in the States but it's also the case in Europe, it's less important here but it's not irrelevant.  That industry is chock-full of great scientists, technologists, engineers, brain power.  They're looking for new ways to apply that knowledge.  This is a perfect sector for them.  And although I had this conversation with friends quietly because I wasn't really sure where it was going to go, I've seen recently signs that it's starting to get through.  I saw an ad in The Economist in the States, the American version of The Economist, from Lockheed Martin, a big defence contractor, 'Lockheed Martin - Clean Energy Solution Provider'.  It's a sign.  Now, not all of those businesses will go that way but my proposition is this to this:  We have got to look everywhere in our society for these solutions, and inside the defence industry there is knowledge, capacity to deliver technological innovation, there's a lot of public money sploshing around, an ability to take technology risk as well, so many innovations have come out of the need to win some arms race that in the end produces a benefit for society, a good and interesting place to look.  Another one of my favourites is the automotive sector again.  Petrol heads don't normally line up with environmentalists.  High carbon?  Not Jeremy Clarkson's favourite topic!  But I know, because I'm interested in these things, the leading automotive designers in the world, many of them are clustered in the UK because of Formula One, are working in ways that are entirely aligned with this resource efficiency, resource productivity and environmental technology theme.  So I picked one, my favourite because I like his cars, Gordon Murray.  He's a South African who came to England many, many years ago and he's Mclaren's lead designer and he designed all their winning Formula One vehicles.  He's also Mercedes' top designer and he designed beautiful sports cars.  What's he's done? He's taken 28 of his top designers out of McLaren into Gordon Murray Design Associates and what's he doing with that talent?  He's building environmentally sound motor vehicles.  He's not building them out of steel or aluminium but composite recycled plastics which are lighter, safer and they produce a better weight to power ratio.  He's just cleaned - if that's the right word - cleaned up all the awards at the RAC Rally London to Brighton, drove that 57 point something miles with 64 pence of cost.  The fuel efficiency is unbelievable.  And the cars are cool!  They look beautiful, they're magnificent, you'd want to drive one.  That's where the automotive industry is.  And so when I had my gripe with George Osborne, as I do, and he just suggests that he's not going to risk the UK economy to save the world, and he starts his speech by saying what they're going to do as a growth stimulus to invest in innovation and he picks out a company Graphene who's at very early research and development, that's public money going in there, I want to tell him I can take you to real businesses right now at the cutting edge of, huge global businesses here in the UK and I can call them green.  And in that sector, you are looking after old businesses, you're looking after steel who are complaining to you about a price for carbon and threatening to leave the jurisdiction.  And that's nonsense, they're not going to go and if they go it's got nothing to do with the price for carbon.

The aluminium industry?  They're not going to leave either.  Unless we're offering free power to the aluminium industry, then we can't compete with the Gulf States, but we can make vehicles without either, and they will be smart and efficient and attractive to consumers, bit by bit as we build the marketing up around what these things can do.

So that's my parting shot to you.  I think there's an opportunity to take this win and push on and don't be at all shy about shaming those who are in the way.  Secondly, you can reframe these arguments around resource efficiency and resource productivity and you can find new allies that you didn't have before.  Third, there's a narrative of innovation that is exciting and positive that will emerge, and as it emerges it will connect with huge market opportunities, not least in the region.  And that will happen all at the same time as Australia continues to sell raw materials at a high price.  And that's the hedge that Australia has in its favour that very few other countries have and it makes the place blessed.  I'll take your questions.  Cheers, thank you.  Yes, go for it.

Member of the audience: Cheers.  My name's David and we're... Smart Energy Services...We're finally caught up near you Given that you're a few years ahead of us here, how would you have done things differently if you do it again now?

James Cameron: Well, let's start with one feature of the Australian system that I wish we had had before, and we started and which I think we would have been a lot better of had we had a fixed price to begin with, and although there's some understandable criticism from all sides about the fixed price period and probably why the regime got wrongfully named as a tax when it wasn't, that was a tactical error of course but that fixed price period is a good idea.  It does help people organise and manage their first response to the price signal, it's just easier that way, and then going to a floating after is also sensible.  Actually that structure would have been terrific for many of the other incentives out there too, not least the feed-in tariffs that could easily have done the same of being fixed for a while and then floating a bit longer than three years but nonetheless that would have been a good combination.

I've got lots of things I'd like to wish away that have been a problem.

Well, one of them is really a pitch to the environment community that I think you're all right here actually, I think it's not going to happen here but when the more radical end of the environment community in the UK and Europe attacked the carbon market as a sort of place for dodgy dealing bankers and went after the governments because they preferred pain to be suffered at home and they thought they were able to characterise the system as a kind of easy escape for European business by buying reductions elsewhere, they just fell right into the hands of those who wanted to do nothing, particularly in America.  Huge damage caused, discrediting of the system, still paying for it.  The system could have been designed a lot better.  Administrative problems.  It's really important here to make sure that whatever is done with a new regime is easy to understand and to operate and efficient to do, like any other marketplace, especially electronic marketplace, no glitches.  And of course full scrutiny of all the regulators on fraud so that we don't have one ludicrous VAT scandal undermining the credibility of the entire regime.  Those sorts of things really matter.

I suppose another thing I would like to see avoided is the plethora of small gestures.  One of the things that's really good about carbon pricing if you're old enough is that it allows you to send out a signal and wait and see what comes back.  And if you do it strongly enough and boldly enough, all manner of creativity is released.  But if you think you know where all the answers are, the tendency is to drop a little bit of money here, a little bit of money there... and it just never amounts to anything.  So this is one of those occasions that the jurisdiction has had the guts to deal with some very strong opposition and start.  And I think it's a good structure.  Now we've got to be bold enough to push on and if, for example, look at the current debate about price, of course the price is low in Europe because there's lower industrial output and it's inexpensive to reduce carbon.  That's why the price is low. Both those things.  But if you want the price to do more in terms of innovation and stimulus, then you obviously have to set tougher targets.  And that's the dialogue you should have.  If we import lots of credits from South East Asia that are really cheap, well, that's the conversation you have with the public, it's not expensive to cut carbon, therefore we're going to have tougher targets.  That's the dialogue.  We didn't get that right in Europe and we nearly got it but the environment movement made it harder for politicians.  They sent rude things through the letterbox of politicians about the carbon market and it made it harder for that policy to work.  And which means they have shifted to more expensive policies, regulatory policies, commitments to renewables that they can't honour.  So that's a danger.

Member of the audience: Brer Adams from Macquarie Bank.  I want to get some comments from you in relation to the global outlook for renewables. In a developed world we're seeing feed-in tariffs fit in wound back and including amongst the largest emerging economies for example, Brazil, just wondering what your firm sees as the pockets of greatest capital attraction.  I'm thinking particularly whether you're looking at South East Asia and that market, and then just to make the question possibly long, here in Australia, where do you think the renewables market is going to open up for investors such as yourself, given the sort of typical nature of the market here and the reliance on PPAs?

James Cameron: Sure.  First thing, I don't like to answer renewables questions without first emphasising that I'm really interested in the transformation of the whole system.  So renewables will flourish at scale with a smart grid.  If you have a really state of the art grid, all renewables will flourish, you won't have to pick one versus the other, they'll just all come forward because that's both the regulatory framework and the technological infrastructure allows many technologies to flourish whether it's a rooftop or a community scheme or a very large concentrated solar power facility out in the bush.  So I would just implore you, particularly those who've got some reason to promote renewables, don't do it unless at the same time you promote a more efficient, technologically advanced grid and indeed you face all the battles over ownership and who owns what part of the... I mean it's just going to be hard, you'll never get renewables up to those big percentages without taking demand down, and you'll never take demand down unless you've got good quality data.  And we can do it all, there are companies all over the world - maybe part of my answer to you also is just to look at what we've invested in, you know, proof of.  In our cleantech fund, we've had a go at many aspects of renewables but we've also invested in smart grid, albeit one particular version of it, and there are several, that happens to be broadband over the power lines, but it's all about information, good quality data in real time allows you to match supply and demand.  But we've invested in thin film solar, we've invested in silicon recycling to help the tremendous growth in silicon solar products, particularly in China, we've obviously had several years investing in wind although relatively small scale wind, most of our advisory work has been in big scale wind but our investing has been in small scale community wind.  But we've also invested in energy efficiency service businesses and LED lighting businesses and energy storage businesses, more efficient batteries, more efficient ways of storing power in mobile phones, and we love those businesses, we love closed loop businesses, anything that's more efficient that can feed into a large marketplace, we like.  And so always the renewables discussion has got to go hand in hand with the storage and reduction of demand question, then you can see renewables really flourish, including here.  So there are some standout possibilities here.  God, I mean you could do big wind here, you could do concentrated solar here, the resources are immense, you know, the nuclear power unit in the sky is particularly good in this part of the world.  But it's not easy because that nuclear power unit has to be managed and directed and made constant when it's not constant, so getting that water temperature for your steam turbine right at the right temperature, that's very hard, technical engineering capabilities are immense there.  So I think the prospects are phenomenally good here, phenomenally good.  The other thing I would just emphasise here which is perhaps a bit rude but no one would seriously, seriously regard Australia as the most efficient user of energy now.  The grid's not brilliant.  There are some ancient coal fired power stations that have just got to go, because they're ancient and expensive.  I know it's part of the political discourse that coal is cheap but it obviously isn't.  It obviously isn't cheap.  Think of the costs associated with owning those facilities over many, many, many years, think of the residual cleanup costs, who pays those?  Think of the radioactive waste that's in coal ash and slurry, I mean who's paying for all that, that's not cheap.  So there's a tremendous moment to just elbow out the old and bring in the new but you've got to be bold and you've got to do it at scale and you need a good grid.

Member of the audience: James, a fantastic presentation and I'm sure if you spoke to any CEO or investor they couldn't help but agree with you in terms of the aspect to efficiency and framing everything in the context of that.  But at the same time we're dealing with this dynamic of increasing short term as in markets and increasing shorts terms in investment decisions.  You know, you've got traders in Switzerland leasing space next the London Stock Exchange so they can't be half a nanosecond behind in their trade and disadvantaged, and we're looking at that high frequency trading and momentum of investment strategy.  So how do you think we should try to reframe the debate and reclaim capital markets as responsible investors to actually execute on what you're saying in terms of how we allocate capital across all the sectors?

James Cameron: Yes, that's really important, Amanda.  I have views, I've also been immensely frustrated at my inability to make my views count at all in the institution of the investor world, I've been talking to them for so many years, so let me give it a try.  The font of the capital market, the flow comes from large institutional investors.  They can set the terms for their managers, they can change incentives.  They can tell their managers how they're going to be rewarded differently and they can give them longer time horizons.  The CEOs of the world would join in celebration if they were judged on longer timeframes.  The analysts of the world could be paid just as well for being less hysterical about what somebody said when they blew their nose yesterday as opposed to what actually happened in the real world over a longer period of time.  All these people desperately want to do something else with their time but they feel as if they're so highly stimulated by the reward system as it is that they don't seem to be able to move.  And as you're also intimating, the SuperFund Industry here is an example, writ large, everywhere, they are much better informed climate risk now but they haven't done a damn thing about their allocation strategies yet.  And one of the arguments for that is that they can't see ways of deploying large amounts of money, they're frightened about small amounts of money, they don't know how to manage the risk, and their buckets for investment are constraining.  And it's become just silly.  Those arguments are not reasonable.  So I suggest a couple of things might work.  One is, and I know how important the consultants are here and I've got a mate who started a pension consultancy in the UK and I like his style and what he's been trying to do.  He's been trying to go into the pensions there and say can we stop talking about percentages within the set boxes, equities, fixes income like, can we stop talking like that, can we focus on what's really important which is your long term liabilities.  If we just talk about that, we might find there are things you can invest in that don't fit neatly in those boxes but do deliver what you need to honour your beneficiaries.  And he gives the examples often that are right in our slot.  He talks about bond-like yields, he talks about infrastructure returns, he talks about what it's like to own, funnily enough, water companies and to look at how you can create value for your beneficiaries owning several parts of the value of that business including its corporate debt.  So I think that's an interesting way in.  Begin with your long term liabilities, ask yourself how you're going to match them with your investments and stop rigidly allocating percentages between boxes, especially today when you've lost confidence in all of them.  All right?  There's no money going anywhere, it's been piled up in great heaps and no private equity, I mean we've been suffering as you probably know, we've had one of our investors just say 'we're not doing private equity at all now, and announce it to the public, thank you very much', and that's a massive off risk statement and no economy is going to grow when their major institutionary investors decide private equity is off risk and we just won't go do it anymore.   So that's my first thing.

The second thing is that we do have to respond to those short term alarms so in my disagreement with George Osborne I've done a deal with him in the lobby of 10 Downing Street.  I've said I'll work within your strictures, deficit reduction, growth stimulus, jobs, consumer bills, I've got it, those are my constraints, I can look long term - I do - but I'll deal with the short term, I'll bring you investments that fit in that category.  And I think we have to do the same with the big institutional investors, you tell me what your problems are, so I want that dialogue between the CEFC and the Supers to be in on this, you tell me what your problems but I'm listening in order to do something and you're going to do it with me because I'm deadly serious about clean energy finance, I'm not going to move till we've done something that delivers the public good that this legislation demands.  So you keep talking to me and you keep telling me what you need.  If you need a bond-like structure and you need to spread the risk in the construction phase and you don't believe public policy is going to be certain enough and you think public policy risk is your main reason not to, let's talk about what guarantee we can get out of the treasury, let's talk about what guarantee we can get out of the insurance industry which is frankly interested in offering products like that.  But that I'm afraid is the best I can do because I'm doing this every day and not winning.

Member of the audience: Should we ditch STIs?

James Cameron: Well, you know, I've said this before, I've never been very excited about the socially responsible investment space, not because I wasn't full of admiration for those who pioneered it, I am, you know, I immediately think of Tessa Tennant, my friend, and doff my hat which is over there, but it's so important for this to be just what you do to manage risk and find opportunity every day in your main funds and I don't want a nice green sand pit to play in, I want a transformation to live in a better world with a more robust economy.  Yes, the gentleman here?

Member of the audience: Ian Williams, Linchpin Capital.  You touched on it briefly earlier about the experience in Europe when the more radical end of the green movement, instead of capitalising on what they'd won attempted to take it three steps beyond.  You can sort of see the same debate beginning here when you have Bob Brown come out and say 'carbon tax is great but it's only step one and we're going to go a whole lot further'.  You can never silence the... on either end of the political spectrum but how do you slow that down so that the doubters can catch up with where the legislation's gone to and actually progress it sensibly rather than having the whole thing derailed?

James Cameron: Yes.  It's a good point because of course what's really, really annoying about the deep greens is the possibility that they might be right.  Eh?  And that we are so far behind the right trajectory that the scientists, broadly speaking with all their difference have been offering us... we are so far out of whack, we are so much at risk of not meeting targets, that there is a risk that the deep greens are right.  But they're not right about how you move a society to get there, particularly highly diverse and relatively shall we say free society that has millions of decision makers every day, and there's a real tendency, especially at the extremes of both, to go for autocratic solutions and I don't fancy that.  And one of the things that I want the environment movement to appreciate is that they need lots of friends and this kind of legislation gives them new friends to work with and you need to be patient in some respect to, as you say, bring along those otherwise renegades and you need to have a narrative of success that includes the many interests you might otherwise oppose, and its not perfect, it's never going to be perfect.  NGOs routinely make perfection the enemy of the good.  And in a way that's okay as long as someone is there to intermediate between them and the rest, and that's why you do need good quality political leadership and business leadership that's perfectly capable of balancing these interests and holding a ring.  I hope that some of the answer comes with things that again, the institutionally-vested community actually want, I know they want, which is real assets producing real dividends they can depend upon and offer to their beneficiaries.  And often those real assets are touch and feel assets that the consumer can understand and not fancy financial products that they don't get all.  They are power stations or they are green buildings or they are high speed rail or they're something that they can identify with that feels like and asset of the nation, a patrimony of the nation.  And I think the steam to develop now, I think now you've got a wind behind you, the theme to go for is how do I improve the stock of the nation to be better able to cope with climate change even if amongst many constituencies they're not that with you, but the stock of the nation, that building stock, the land, the capacity of the natural systems of the country that do resonate, people do care about nature, they really do care about nature, the need to have those functioning effectively in order to live well, and it's a good moment to seize that.

Member of the audience: James, I just want to ask this last question, when we talk about de-grain and yesterday the IEA...  were talking about how bad things are, which they by no means do... maybe you can comment on putting that in context perhaps.

James Cameron: Do you know, it's a funny point that, sad funny point, bitter funny point.  Just for a moment imagine the International Energy Agency, the research house of the fossils, you know, the place where the OPEC nations keep their data, the Chief Economist, Fatih Birol, who's a really good bloke who has been very much on the moderate side of the high carbon world, comes out and says we are so much at risk from climate change that it may even be - I tell you, you used the word 'rat bag', it's at the lunatic end of the green spectrum for many and this guy is the Chief Economist at the International Energy Agency.  Those statements about the risk of having gone beyond the tipping point, the fact that we have no chance of hitting two degrees and that if we don't hit two degrees we're into very dangerous territory with unpredictable non-linear change.  Now you folks in the investment world, you know about non-linear change.  This is not nice and steady change, this is not a little bit of warming over a long period of time and we'll see what happens in 150 years.  Non-linear change is about collapse of systems.  Systemic risk you'd have thought we'd have learnt something about in the last few years but this is a big systemic risk and we're not doing anything like enough to manage the risk associated with it.  And the people who have the most power to do that?  Of course they're governments but they're also the big institutional investors, because they are the font of the capitalist system, still the most important way of distributing value in the world, and they need to act, they need to learn how to allocate a way from high to low carbon and they need to do it with the incentives that you have now in place here but obviously in many other parts of the world.  So that report is striking, it's striking, and it's one of those things that makes you realise that even whilst you try and bring in as many different interests, the hard edges of the science, the physical edges of the science are very unforgiving.