♪ coming up on bloomberg best conversations from the 2020 world economic forum in davos. the biggest names in banking and finance discuss the biggest issues facing their industry and the global economy. >> i don't expect a lot from the fed. >> we want rates to stay low. >> we have seen the end of the boom bust cycle. >> this is the new normal. in onld leaders weigh challenges and opportunities and politics and policy. >> we do not minute billy currency. >> we are united in the european union. >> we are committed to policies

that are economically responsible. >> i think that is ridiculous. >> the crisis of climate change is front and center at davos. bloomberg drives the conversation on the most important transformation of our time. >> climate change is becoming an investment risk. >> you have the core of the financial system wanting information about the transition. >> companies need to get on with it. >> what will you do for me? >> that is all straight ahead on the special edition of bloomberg best. ♪ >> hello, i am viviana hurtado. we are featuring conversations the world economic forum in davos.

bloomberg television spoke with the most influential and insightful leaders in global business, finance, and government on today's most important topics fighting the world. this is the opportunity for power players to discuss the state of the economy, the momentum of markets, and the decisions they are making to row their firms. this year was no different. let's start with goldman sachs" chief executive, david solomon. >> the monetary policy that has been in place has been an enormous stimulant. when we sit here today and i think about the path forward i erios thisre in a p year that i don't expect a lot from the fed. the balance sheets come down a lot over the past couple of years. this impacts equity in markets.

the fed has done a reasonable job. any time fed uses resources to affect liquidity it is having an impact on markets. >> we want your take on the markets of the last couple of months. >> as i have been around talking to clients one of the things i do while i'm here -- i see and a confident,ay is middle-of-the-road view. capital spending has been lowered the people would like to see but the consumer is overcome sitting for that. europe is a little bit utter. the phase i deal helps a little. in the distribution of outcomes overwhelming to nara -- scenario is the economy will be five in

the long run. >> balance sheet expansion, is a qe or not?ot -- is it rules atd only has two the moment. they only have the balance sheet they are working with and they are a form of qe. they have done it for good reason. when they raised rates the market was still scarce so i think the fed is bringing back in line. >> i want to move to morgan stanley. statements of improving margins and if everybody wants management,wealth is there a risk? >> there is a difference in wanting to do it and being able to do it. scale up and wealth management.

we made that call 10 years ago. there are monster players whether it is on the direct side ith what fidelity has done, is very hard to replicate that. ♪ rates go further negative or is there saying among policymakers they need to rein it in? >> there are two types of driving factors. crisis, linked to a al.ers are more structure those long-term trends weigh on rates and people expect rates to stay low for assisting --

sustained time. >> are we miss pricing risk? what does it mean for the model of banks? >> we need to be efficient. done.ow the work we have to be able to navigate the environment there is also a layer of political risk that has added to difficulty. i am still very positive. >> worldwide or in europe? >> in europe. we see good growth everywhere in asia,china, southeast latin america, brazil is doing well. the middle east is doing ok. africa is doing well and that is a lot of the world. >> 2020 could also be the year

where europe does better than expected. what are you concerned about in europe? >> i am moderately optimistic. things are getting better. be a long journey for you. ♪ i believe with that interviews at the following, " a market sharing consumer depending on who counts, the reality is you could double that." do you want to double that and when? >> the context was jeff to go outside the united states to do something and the answer is no. even though the market share is high in the top 30 markets in the u.s. we are the top and retail banking and 12 of them. up until two years ago we were not within seven. every philip the seventh that is -- if we fill up that

seven that is a lot of growth. this is the challenge of my team. the reality is it is the response. >> let us talk about the leverage loan business. every week there is concern about leverage loans. you have great insight. walk us through your thoughts at the moment. it is in funds and other support. what will happen when those companies don't fare well? will they work with them the way the banks will work with them? the other question is in the asset context that feels good at the moment but when you traded from that person, what will the next person do? those questions are open and what will be the impact on economy? our leverage lending as a small

part of the on balance sheet exposure. ♪ if we areear i ask going to see consolidation and the banking sector. >> one day it will come. as time goes by we are getting close. i do believe that the second half of the year will be an important moment. you are going to see the rules andon of the how they will be implemented in europe. before that or after that you may start to see people offsettinghe need of a shortage of capital with combinations. i think it is a necessity for europe. when,not a matter of if, who. >> is that a catalyst?

for banking consolidation? furtherdy today without you have an issue of critical mass. scale peraying that se is the solution, but when you are focused and you have capabilities, you still need scale. inmatter how good you are the competitive landscape scale matters. it offsets margin compression the savingsdeliver to an attractive capital return and invest in the future. ♪ still ahead as we reviewed the week in davos conversations with leaders, their decisions shape politics and policy from central bankers

to heads of government. >> traditional center-right parties in europe with the right agenda can actually win elections. viviana: how businesses are grappling with the implication of the climate crisis. we set up package for everyone by 2030. >> this is future proofing the organization. viviana: more insight from the most influential voices in finance and investing. markets and the global economy look strong but what should keep us up at night? >> perfection does not last. >> may be in five years we will not talk about the subprime bubble but the equity bubble. viviana: this is bloomberg. ♪

♪ this is bloomberg best"

and i am viviana hurtado. we are revisiting conversations from the world economic forum in davos. let's stay on the topic of markets in the global economy. some of the world's most respected investors, anchors, and economists show their outlook for the year ahead. here is blackstone chairman and ceo stephen schwarzman. ♪ >> what is the biggest unknown for 2020 for the markets? >> it is not global growth. that will continue. markets arerisk for two types of things. u.s. domestic politics and the black swan effect that can happen. we had an incident that happened in iraq. i was watching television. -- everyone is

declaring world war iii but if they were right and the streets up withsed and we ended a huge dislocation you could get thrown, accidentally, into a recession. >> it is amazing how the market is discounted once there was no immediate threat of war. we have asset prices priced at perfection. how did the two match up? >> usually perfection does not last. this has been an amazing run. normally you expect some type of havetment but if we don't an event with u.s. politics, and we avoid the kinds of major , iernational type of risks

think we will go on with ability over today's levels. ♪ do believe there is a sense that for the next 12 months or maybe 24 months we are going to have economic growth. it may be slow or slower and places like china and germany but there is economic growth other. there is reason to invest and reason to be more optimistic than business leaders were last year. the only issue is -- if we are wrong. >> chief executives are optimistic enough to put money in capex? >> if the labor market begins to put greater pressure on wages and supply chains get broken and productivity slips and you start to see inflation, we have a long way to go for the central banks to correct the monetary policy

in case that happens. it looks like good news. if you start to see inflation rear its head, we have a lot of correction that needs to be done to get monetary policy in the right place. ♪ you see the biggest risk coming from? and 2020 i think there are two things. there is a risk that markets have moved ahead of the underlying economy and market earnings. the u.s. market has concentrated on the tech sector. we are from normal to headline levels. there is an element there for ing out. we see when we look across the landscape of regulation that -- we areis beginning seeing capital being allocated

to be trapped with individual businesses. we are getting an odd spike. there are odd bouts of volatility because the capital could not move around, the liquidity could not move around the system as rapidly as it needed to. i think that remains a risk. ♪ if you look at risk to the downside, what are your top three? >> it is uncertainty at the top of the list. it can come by many factors. year tensions, were last was number one. we have seen from the start of climate withot australia. there was tension in the middle east and there is concern over a virus.

we have to recognize this is the new normal. keen to see governments pick up on the policy front. monetary policy has served as well but cannot be the only savior of global growth. whether we would be ambitious and weon the policy side want to see how the consequences of prolonged interest rates may play out. ♪ >> it is a single digit world. there is all the rationalization, interest rate the macroen there is bet. how do you recover after 2019 on the macro side? learned.as the lesson the tightening of central banks

around the world is not intended to cause a downturn. lessons were learned from that. i think it was a marker that we have probably seen the end of the boom bust cycle. >> we never leave the boom bust cycle. i love to quotient a burger -- chindelberger. they always come back. bubbles are detected at first so maybe next year or five years we will not be talking about the subprime but will but the -- bubble but the equity bubble. ♪ viviana: more conversations from davos. the bank of england to governor said it became impossible to overstate the impact of climate change. >> it is becoming pretty clear that this is, if not the biggest problem, it is in the top three.

viviana: hong kong leader is under pressure to resign but carrie lam tells bloomberg she will not run away from a city in crisis. >> i will do my utmost to stay in this position to help arrest the current situation. viviana: this is bloomberg. ♪

♪ watchingyou are bloomberg best and i am viviana hurtado. this week march the launch of lumber green -- bloomberg green. it is an indispensable guide to understanding the scale and impact of climate change. it features news and analysis with an emphasis on healthy solutions. we are using clear data and rigorous reporting across all of bloomberg's platforms.

for the first time the top five concerns at the world economic forum were all related to the environment. the conference theme stakeholders for a sustainable world. an onstage conversation with francine lacqua, bank of england framed itmark carney, for business and government. ♪ >> any transition is easier if you know where you're going. the clarity of objective and ifection of the policy, even it is starting relatively small with a clear directory or a , all of thosert things signal to individuals, companies, investors where to put their money. ith the market will do is

will pull forward adjustment. it will act more rapidly than policy will help fill in. attitudes and pressure also help shape those decisions. i think that is part of what we are seeing in terms of the response. finance,nse, again in if you look at it, you have the core of the financial system -- they want information about the transition. they're going to different views on where to put their bets and that is fine. the bank of england and other central banks will do this as well. testing their banks for transition to net zero. the most complex financial system, that is what we are doing. at the core of the system these questions are asked. are you on the right side or the wrong side?

if you are on the wrong side, what are you when to do? >> why are investors suddenly realizing this is an issue? >> i think it is a combination of things. the biggest investors and donors are going to be around 30 years from now. they can see the implications for their asset. the people at the frontline in the insurance industry are dealing with the pricing cost everyday. people are responding to their client and actually they are not disembodied. these institutions are made of individuals and they can see the imperative. in the end, what is the market system? what is it therefore? to find solutions. ifis becoming pretty clear it is not the biggest problem, it is in the top three and therefore that is what the market will go. ♪ mark carney was just one of

many leaders who spoke with bloomberg about the climate crisis. larry fink explain what blackrock is making an all-out commitment to sustainable investment. ♪ >> climate change is not going to be fixed by a central bank. viviana: coming up perspective on politics and policy as we review the economic forum. --let us look at the facts look at how the economy evolves. viviana: this is bloomberg. ♪

♪ welcome back to the special edition of bloomberg asked. we are featuring conversations from the world economic forum in davos. i am viviana hurtado. the annual conference drew almost 3000 attendees. , 53ncludes 119 billionaires heads of state, and central bankers. president spoke to us about policy and politics friday. ♪ >> we need to do a lot of stock-taking, looking at the effectiveness of what we have done, learn from other

countries. the fed is undergoing the same exercise. we need to take time to reach out to the parliament, to people, to those who are interested, to hear the voices. we will listen to markets as well but they are one of the voices. this willst believe be on autopilot. is that mistake? >> to those who think it is autopilot i think that is ridiculous. there is a forward guidance which is strong, which is setting a very clear timetable. let's look at the facts. look at how the economy evolves -- that is what we do. we need to be fact even -- driven. don't assume it will be on autopilot. >> yesterday you talked about negative rates. is there a point where the side

effects of negative rates means you need to scale back? >> we need to be attentive to that. financial stability is not the first driver of concern and consideration but we will have to look at it. don't forget we need to have a banking sector in the area that access a channel of transmission. ♪ most efficacious way to speak to the president of the united states on trade? >> forthright. >> who is the voice that can sit across the table? >> this is a european theme. we are united in the european union on trade. that is one of the successful things we are doing. one of the consistently successful things we are dealing with is trade. with the u.k.k

when they are leaving next week. i am optimistic about it. we know what is important for trump, for europe, and we are pragmatic. ♪ europe is full of socialists. >> that is very wrong. >> is full of left-wing politicians and want to put in a rule around the block. want a center-right agenda . reducing taxes, inclusive economy, we have absolute majority. we beat the populace at their own game -- populists at their own game. provided they have the right agenda they can actually win elections. they can certainly be the rhetoric of the left which

essentially led us to a second crisis. ♪ a the u.s. has put you on currency manipulator watchlist paired does that impact the ability to trade? >> we are in a good place with the americans. the way theee statistics are set up. we have very low in inflation. we can use instruments to maintain a reasonable monetary policy and switzerland. >> does it worry investors if the u.s. -- i don't know if you took calls on the manipulator list. do you think it hurts your credibility? >> it shouldn't because we can explain it well. we do not manipulate currency but we intervene in order to

steal monetary policy into his room at. avoid that the swiss becomes too strong. do have ata flavors -- to have a deflation situation. ♪ us an update and south africa. moving rates around, does it have an effect on the economy? 's monetary policy and effective tool for you? >> at the moment it is. , if it was not we would not be using it. we do not have the problems the developed world has were monetary policy is at zero. we have the flexibility -- >> how charming. that is good flexibility some would say. is on forecast for us

stability. we have been adjusting policy to deal with the challenges of stability. ♪ is there anything you worry about? >> we always worry about the global economy and the challenges that might be around the corner. from our perspective making sure we have a strong trading relationship with united states and mexico is job one. that is why we are getting on this first and foremost. we will manage the other risks around household debt. >> and productivity. can you fix it or is there a puzzle around the world? >> we have to try and get at the things we get at. we are focused on worker training. we are a country that continues to embrace immigration so that we can deal with the changing

and challenging demographics. those things are important thing blocks. we are also looking at how we can make regulatory framework more advantageous. canada is a good place to do business and we want to improve it. ♪ >> what we have seen is unprecedented. confessed and taken full responsibility for misjudgment and the sort of lack of a full assessment of the situation. let me make it clear, hand on my heart, that bill was well intended to ensure hong kong could tackle serious crime and also plug the loopholes in the regime. it benefits us from having any legal assistance on criminal matters that have anything to do

with other parts of china. >> you have said you are willing to quit, if you could. would you quit if that could help resolve the crisis in hong kong? quit is not difficult to but walking away from such a big dilemma and problem now is, in my view, not very responsible. >> it is one of the demands of the protesters, that you resign. would you if it is for hong kong? >> my judgment and decision right now -- because we have several crisis we have to manage -- i will do my utmost indisposition to help arrest the current situation. ♪ we have been quite clear on the record. climate change has an impact. the bushfires in australia have occurred but we acknowledge

climate change has worsened the events. said herime minister wanted to transition carefully on target because he does not want to hurt jobs in fuel intensive industry. >> we are focused and committed to policies that environmentally effective and economically responsible. we are one of a handful of countries around the world that beat the mission reduction policy. at that andg to be that is a commitment. that is more ambitious in the european union, and other countries around the world.

we do have effective measures in place but in the end what we are guided by is a particular -- it might invert only make things worse -- inadvertently make things worse. viviana: plenty from davos still had. more conversations about, in change -- more conversations about climate change and teaching the flow of capital. >> sustainability matters. viviana: this is bloomberg. ♪

viviana: you are watching bloomberg best and i am viviana hurtado. let's get to the topic of climate change. it was the central theme of this year's world economic forum.

it is an issue bloomberg will cover in depth through the green initiative. this we get launched. many business leaders who spoke with bloomberg and davos discussed the importance of sustainability and environmental responsibility. starting with the chief executive of global energy companies. ♪ the industry hasn't seen anything like this for decades. it is a big part of what the big energy companies are doing. 2 billion more people on the planet, one third more energy needed, we need to reduce emissions and increase energy in all forms. we need to be careful about our investments. it will transform in the next decade. companies need to get on with this. >> to see some of these issues as an existential risk to the longevity of a company like bp?

>> 10 years ago we got off production value. it is about value over volume and you really have to think about value and where that comes from can be anything. we have big big renewable business today. returns't have the same but we have to set up policies that change the demand patterns of the market. creates itupply that is supply and demand. you have to change the demand profiles. ♪ economy is becoming more efficient. cleaner and more competitive is generating industry jobs. the point oft only how you produce electricity which you perform in a markley manner but you are generating what is around.

that is what you have to contemplate. we have to make it more sustainable. that is what we are doing. a look at your investment in australia, what growth andential and after australia where do you? invested $35 billion a year. pleased to do so. the demand is there and that is why we are coming. with more clean energy, better networks as well. ♪ announcedast year we

a new statement of purpose. progressivenot be a energy and solutions partner and reaching for a sustainable future. gas is not there. we are looking at our portfolio. have around 5% for renewable energy which is solar and wind. i think this is part of future proofing of the organizations. transition as many call it. still -- oil and

gas will still be a major role but will be accompanied by other forms of energy. ♪ what can you do to adapt? still consume the drinks in 20 years. plasticage packages, bottles and cans, are high-value items and we can take them back. we set the goal of collecting a package for everyone we sell 2030 and reusing that material to make new bottles. the first market where every package we sell will be made from recyclable material. then what you achieve is not just zero packaging waste but you have a much lower carbon footprint. we consult two problems and one go. ♪ >> what we are seeing now is much larger consumer interest

and interest from financial markets. i think that is a good thing. it means you get free water for the effort you are doing. >> is there a danger that when recession hits the green initiative is left behind? >> the momentum that has been reached is such that it is here to stay. point ishat tipping already here. it will stay with us and that is a good thing. it should not be something that is cyclical. it is not cyclical when it comes to our commitment. ♪ i believe we are facing a climate crisis. -- everyverything company has to do something. i'm going to have a grandson that looks at me and say what did you do? they are expecting us to do something. >> how about shareholders? how much pressure are they putting on companies to do the

right thing? >> shareholders are starting to show sustainability matters to them. there is more and more shareholders asking what we do in this area. the pressure is not strong enough to be frank and companies tol have to be incentiveized do something. >> how should they be incentiveized? >> they will be so by the employees. you go home every day and talk to your children and they are going to ask what do you do for me? our grandchildren will look and say what did you do for me? our employees, especially the young people, are expecting us to do something. ♪ when you speak to chief executives has something changed? does greta thunberg matter to how they invest and see the world? >> yes, it has changed

something. some of them have children and they have the same discussions we have. they have to answer the same questions, dad, what are you going to help us in the future? when i talked to company leaders they very much talk about sustainability and changing the strategy of the company's. >> do you think this is a movement here to stay? is there a danger this is fashionable for a couple of years and people forget about it? >> yes and everyone should worry about that that it is just talk and then they go away. we have to change the system. we don't have to fix the system but become aware the external problems are part of the interior system and logic. ♪

♪ viviana: this is bloomberg best and i viviana hurtado. we are looking at the world economic forum. larry fink warned that climate financeill up global more than many think. blackrock is the largest fund manager. he pledged it will make sustainability a central focus of its investment saturday -- strategy. ♪ being in the capital market when0 years it is clear the capital market bring risk forward.

we don't wait until the risk is in front of us. there are times that happens and that was a great crisis but in most cases we navigate the risk and through that we mitigate most risk. there is a greater belief in science and as a result, we should not avoid the conversation about climate change because climate change is becoming an investment risk. investorsnt than focus on yield curve it was clear to make that we need to bring forward better risk tools to navigate risk. this is a component of the toter asking more companies be more self reporting on things d.ke tcf so a better understanding how each company is navigating these issues. i am not here to tell you these are the best tools.

they are good tools and hopefully we have better tools. i do believe we are on this long path. in 2019, most of the sustainable funds outperformed regular funds. you can argue that is a giant momentum tried. we had record inflows. >> particularly in esg. >> record inflow and esg. we announced every one of our products are going to have some sustainable counterpart. andan bring this forward have more investors a part of this dialogue. -- say onetay important thing i did not write about but inferred in one of the central paragraphs and that was climate change is going to be a 50 plus year journey. society, as humans, are

going to use carbons for a long time. the key we need to do is find ways of mitigating those risks while we are dependent on carbon. concern is not that we the capital market are going to find a lot of capital to invest these projects. my biggest fear is the dependability and dependency we have on government because i don't see governments working toward these long-term objectives. >> is there any sign since you started governments have gotten better with dealing with these issues? >> some governments are but most are not. most are so focused on electioneering and election cycles we are not seeing any long-term planning.

this is one of the fundamental problems i see with climate change. it requires real planning. somethingange is not that the federal reserve and central banks are going to be able to fix. my 45 years of being in the business you have five large financial crises. they were able to navigate that and mitigated. people were harmed by that but we were able to fix them. climate change is not going to be fixed by central bank. it is going to be fixed by combination of public and private. ♪ viviana: that wraps up our review of the 2020 world economic forum. you can find much more conversation from davos at bloomberg.com along with all of the latest business, news, and analysis 24 hours a day. thank you for watching. i am viviana hurtado.

this is bloomberg. ♪

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