Investing in the Future of Emerging Markets
Emerging markets: responsible investment opportunities
June 26, 2019
- Keynote Highlights
- Conference Overview
- Panels and Speakers
Highlights from a Q&A with Lord Browne of Madingley, speaking at Cleary Gottlieb’s Investing in the Future of Emerging Markets conference.
Working for oil and gas exploration giants BP since 1966, Lord John Browne knows emerging markets. In his time as CEO from 1995 to 2007, Lord Browne turned BP into a global giant. He was also the first leader of an oil and gas company to acknowledge the link between burning fossil fuels and climate change in 1997.
Currently the chairman of several companies, including L1 Energy and Huawei, Lord Browne shared his experience of the emerging markets sector at the Investing in the Future of Emerging Markets conference on June 26th.
Opportunities in Emerging Markets Today
People often assume that the oil and gas industry prefers to deal with strongmen and dictators because it’s easier to get quick decisions. However, this is rarely the case, for a few reasons.
First, if you depend on one person, you’re dependant on their success – and on their failure. You are also subject to their whims, which leaves you exposed to risk. Secondly, growth and progress only occur when people are free to innovate and exchange ideas. In the long run, societies based on exclusion rather than inclusion will struggle to succeed.
It has always been crucial to get in first and build long-term and resilient relationships. You have to really connect to the society in which you’re operating, from heads of state to local communities. Listen and engage – but never make assumptions.
Technology, in particular its effect on information flow and transparency, presents an important opportunity in emerging markets. There are now more mobile phones in Africa than in Europe, which is driving the rise of innovative new financial platforms, markets and public services. For investors, it has made business safer and easier to conduct by enabling improved activity monitoring – by all parties.
The Role of Shale Gas and Clean Energy
Another change across the industrial landscape is the rise of shale gas and clean energy – but these are two trends we need to keep in perspective.
The shale revolution is extraordinary, but it currently supplies less than 10% of global oil demand. It is also highly responsive to market conditions and therefore extremely volatile, in contrast to the more capital intensive and long-term projects that tend to characterise activity outside the US.
Renewable energy is meeting a growing share of demand, but starting from a very low base. It is certainly creating huge new opportunities for communities that have been disconnected from the grid and traditional sources of power, but it’s unlikely to make a noticeable impact on economies that depend on hydrocarbons – at least not in the lifetime of Lord Browne.
In the oil and gas sector, it is important to keep an eye on regions which are opening up – often as a result of political reform or new discoveries. For these reasons, Mexico, Brazil and West Africa have all become exciting propositions. On the other hand, some areas seem to be closing up, such as Norway, which is increasingly talking about getting out of hydrocarbons.
Responsible Business for Tomorrow
As the global population grows, the task of keeping temperature rises below 2 degrees will get significantly more difficult. We have the technologies we need to do this, such as renewable energy and carbon capture and storage. But we do not yet have the policies, behaviours and incentives needed to deploy them at scale. Business leaders around the world increasingly believe that a global carbon tax is the best way to do this – providing it supports economic growth and minimises the costs to vulnerable communities. Lord Browne had been advocating for this for more than two decades, and will continue to do so.
Duty of Care
There is always a duty, whatever the community you’re working in, to do things in the right way – for society and for the people you’re directly responsible for. That’s why being an investor is important. It gives you a voice. It’s a way of influencing the direction of a company. If you don’t take that place, someone else may do so – and they might not share your values.
Biography of Lord Browne of Madingley
Lord Browne was born in 1948. He holds degrees in Natural Sciences from Cambridge and an M.S. in Business from Stanford.
He joined BP in 1966 as a university apprentice, between 1969 and 1983 had a variety of exploration and production posts in North America and the UK, and in 1984 became Group Treasurer and Chief Executive of BP Finance International. He held senior roles during the BP/Standard and BP/Amoco mergers in 1987 and 1998 and was appointed Group Chief Executive in 1995. He left in 2007.
He is Executive Chairman of L1 Energy and Chairman of Huawei UK, Stanhope Capital, and the Accenture Global Energy Board. He sits on the boards of Pattern Energy and IHS Markit, and is a member of the advisory boards of Edelman, Schillings, and the big data technology companies Afiniti, Kayrros, and Windward.
Lord Browne was voted Most Admired CEO by Management Today every year between 1999 and 2002, was knighted in 1998, and made a life peer in 2001.
He was Chairman of the Trustees of the Tate Galleries from 2009 to 2017. He is currently Chairman of the board of the Donmar Warehouse, Chairman of the Courtauld Institute of Art, and a Trustee of the Holocaust Educational Trust. He is a member or Chairman of the boards of a number of other organisations, including the Blavatnik School of Government in Oxford.
He is Chairman of the Francis Crick Institute, and is a Fellow and past President of the Royal Academy of Engineering. He is a Fellow of the Royal Society and the Institute of Materials, Minerals and Mining, and an Honorary Fellow of a number of institutions.
He was the UK Government’s Lead Non-Executive Board Member from 2010 to 2015, and chaired the committee that authored the Browne Report, an independent review of higher education published in 2010.
In 1999, The Royal Academy of Engineering awarded him the Prince Philip Medal for his outstanding contribution to engineering. He has also been awarded Honorary Doctorates from a number of leading universities, is an Honorary Fellow of John’s, Cambridge, and is a Senior Member of St Antony’s College, Oxford.
His interests are 16th- to 18th-century illustrated Italian books; pre-Columbian art; contemporary art; music; opera and the theatre; and Venice.
Lord Browne is the author of four books, Beyond Business, Seven Elements that Changed the World, The Glass Closet: Why Coming Out is Good Business and the Sunday Times bestseller Connect: How Companies Succeed by Engaging Radically with Society. His fifth book – Make, Think, Imagine: Engineering and the Future of Civilisation – will be published in May 2019.