Mark Carney

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0:40He currently serves as a special UN envoy for climate action finance, and he also chairs Brookfield Asset Management. I had a chance to sit down with Mark recently to talk about how he does all these things so well. Mark has been the Bank of Canada governor, been the governor of the Bank of England. has anybody ever been the governor of two different central banks, two different countries? No, I don't think so. So in addition to that, you are also the chairman of Brookfield Asset Management, and you are the new chairman of Bloomberg. So you obviously like B. It's Bank of Canada, Bank of England, Bloomberg, and Brookfield.

1:30But there's a story in the latest edition of a Canadian newspaper, I think two days ago, that's saying that you might also be the next prime minister of Canada. So any interest in that? In the story? Not in the story per se. You know, it's interesting. You say the same thing over and over, but it gets heard differently in different contexts. And I think that story is probably more an indication of the current environment in Canada. In other words, you wouldn't be uninterested in that. I'm interested that we have an effective Prime Minister in Canada. Okay. So Prime Minister Trudeau, and you know him.

2:09I know him well, yes, and he's done a very good job. Okay. So, but we'll take that as maybe. All right. So I won't pursue that anymore. All right. Let me ask you, as the Bank of England governor and as the Bank of Canada governor, Do you think the central banks recently figured out that inflation was more serious than it was too late? Or do you think they recognized early on it was going to be serious, they just didn't do enough about it? No, I think in hindsight, they realized it too late. They were operating under the old paradigm, if you will, that it was an issue of not enough demand. and that is something that works well generally until you have a bunch of supply shocks.

2:54And we had a COVID supply shock, we had an energy supply shock, we had supply shocks with supply chains, geopolitics, all of which meant that there was more than transitory inflation. And it took a while for some of the central banks to fully recognize that and start to respond. Now that they did recognize it, do you think they've done enough, and do you see any more rate increases likely to come about? There are many people in the market who think that maybe another rate increase in the United States is likely. What do you think about that? Yeah, well, first part of the question, I think that once they started to move, and particularly when the Fed started to move, it did respond in a very effective manner.

3:33It consistently surprised people with how resolute it was and what it was prepared to do. It recognized that the bigger risk was that inflation stayed high or worsened, and has put us in a position, put the U.S. in a position, where inflation is increasingly under control, not totally under control. And that gets to the second part of your question, which is, you know, if I have to choose a camp, I'd be in the camp of I expect that there will be a bit more tightening by the Fed, so probably an additional rate increase this year. But what's as important, in fact, what's more important is the path of policy over the course of the next 12 to 18 months.

4:19And I think it's finally beginning to be recognized. It's been a painful few weeks for some in the market in getting this recognition that it's not just about where the rate is today. It's not just about the peak, but it's the path. And the path of rates is very much, and I've been of this view for a while, higher for longer in order to ensure that policy is adequately tight to bring inflation fully back to that 2%. When I was in the White House as a young man, we were running for reelection under Jimmy Carter, and the head of the inflation effort, fighting inflation effort, was a man named Fred Kahn, former Cornell professor.

4:57And he went out to the White House briefing room one day and said, I think we're going to have a recession. Well, Carter hauled him into the Oval Office and said, Fred, I'm running for reelection. Do not use the R word. It scares people. And Fred Kahn said, well, what am I supposed to do? I have to be honest. Be honest, but don't use the R word. So the next time, Fred Kahn went out and he said, I think we're heading into a banana. He used the word banana as a substitute for recession, figuring reporters wouldn't put that in the headline. So are we heading into a banana, do you think, or do you think we're not going into a banana?

5:28Well, I think the likelihood of a banana has gone down, actually, to be clear. The Fed has done quite a masterful job. Other things have helped. But if you look at, and you asked me a moment ago rightly about unemployment and getting back to the 2%, what's happened in the U.S., almost uniquely in the U.S., is there hasn't been a sharp rise in unemployment. There's been a fall in vacancies, something that hasn't happened in the past. But, of course, this cycle is quite different than any previous cycle. So the Fed's been able to thus far ease some of the pressure in the labor market by reducing vacancies as opposed to increasing unemployment.

6:10That plus the other aspects of the resilience that we've seen in the U.S. economy makes recession less likely, because the reality is, you know, if you get half a percent or certainly a full percent, historically, any time the unemployment rate in the U.S. had risen by at least half a percent, there's been a recession. It's just you get the compounding effect. That hasn't happened, so the probability has gone down, but there's still lots. When you're the head of the central bank in Canada, do you kind of refer a lot to what the U.S. is doing because your economy is so tied to the U.S.? Or do you say, look, we're going to do what we want to do.

6:44We don't care what the U.S. is going to do. Do you consult a lot? We obsess about the U.S. is the short answer because it's the most impactful external factor for the Canadian economy. And there's also some of the things that drive growth in the United States. They're common factors that drive growth and or inflation. Every business starts with an idea. How can you go from daydreamer to industry leader? Amazon Business accelerates your journey. With smart business buying, get everything you need to grow in one familiar place, from office supplies to IT essentials and maintenance tools. Amazon Business takes the buying experience you know and love from Amazon, plus tools that help you save costs and make insights-based decisions.

7:27Ready to bring your visions to life? Learn how at AmazonBusiness.com. Let's talk about your background. So where did you grow up in Canada? Where were you born? I was born in Fort Smith in the Northwest Territories. And you're in the Northwest Territories. Yeah. That's very far up. It is very far up, yeah. So what were your parents? Emphasis on the North. What were your parents doing there? My parents were teachers. And did you ever say to them, it's pretty far up North to be living? And did they ever move closer? They moved, we moved. Well, it's interesting. I mean, it's a two-hour flight south to Edmonton, which is probably the most...

8:03So did you grow up in Edmonton? I grew up in Edmonton. I went to school. And you were a hockey player, too? I was a hockey player, yes. So you played hockey at Harvard, is that right? I did, yes, ish. I opened the gate. I was a goalie, so I opened the gate for a lot of very good players. Really? So were you a star at Harvard in the hockey world? I was very good at opening the gate, yes. But you never considered going to the NHL? Yeah, I considered it. They didn't. The NHL did not consider it. Maybe in some sort of administrative role. Okay, so after you graduated, you went to do something like investment banking.

8:38Yeah. And you went to Goldman Sachs? I went to Goldman Sachs in London, yes, 1988. And what did you do there? I worked, actually, I worked in the credit department. So, yeah, credit analysis, which was probably the best thing I could have done because, you know, you build up a fundamental skill. Now, many people go to Goldman after college. They go and get an MBA, and you decided not to get an MBA, but to get a Ph.D. in economics. Why did you want a Ph.D. in economics? Yeah, I wanted to, well, I thought that at some point I'd work in public policy, and I thought it would be more useful, and I toyed a bit with being an academic as well.

9:17My father ended up being a professor ultimately. So you did this in Oxford. Why didn't you do a university in the United States or Canada? Why did you get it all the way to England? Yeah, it was, to be honest, you could do a Ph.D. in Oxford in three years, as opposed to, if you're in the U.S. system as a doctorate student, you spend a huge amount of time teaching, which is great if you're going to be an academic. If you want the academic training, though, it means that the average time is most. So when you were at Oxford, you also played hockey, right? I did. And were you? I was a star. You were a star there, right?

9:52You weren't competing against other Canadians. I had to go, yeah. Okay, so you stayed at Goldman for how many years? I was back at Goldman. In total, I was 13 years at Goldman, but almost 10 years, I guess. So the highest level you reached at Goldman was to be? A managing director. Managing director. A managing director. A managing director. Okay, so why did you leave Goldman? Some people think it's the greatest thing in the world to be a Goldman managing director. Why did you decide to leave and go back to Canada? I had an opportunity to become deputy governor at the Bank of Canada. I've always had an interest in public policy.

10:26It was a unique opportunity. And I have a huge respect for the guy who was governor at the time, David Dodge. So how would they have heard of you? You're an investment banker in Goldman. People in Canada already... They had an ad. They put an ad in the paper, and I applied. They put an ad in the paper? Yeah. And you responded? Wow. That's the idea. Okay, that's how you got a job. Okay. Well, now it's like... Okay, so is that how you got to be the governor as well? You responded to that? Well, they knew you by that. Okay. Well, no, but, you know, for the governor as well, I mean, that's become the norm now.

10:57Central banks do put ads. I don't think the Fed does. So you're the deputy governor. You then went to the finance. I went to the finance department, and I worked with, yeah, I was one of the. Then you become the governor of Bank. And I became the governor, Stephen Harper. And that was an easy time because there was no recession. There was no problems. The economy was going well. Well, yeah, basically, I remember saying to Diana, my wife, that, look, We had young kids, this job, you make eight decisions a year, you know exactly when you make those decisions. You can have a work-life balance, it was going to work great.

11:30And two weeks after I started, Bear Stearns failed. Ultimately, you finished after about, how many years were you at that? Just under six. Six, all right. You stepped down and said, now I'm going to go back and make money at Goldman Sachs. Or what did you want to do when you stepped down? I didn't step down. I was approached by the UK government to become governor of the Bank of England. And is that like an illegal poaching? I mean, they're going to another country to take the central banker from another country? Did you think that was unusual? Well, it was unusual. I mean, unusual times. Technically, the head of state, Queen Elizabeth, is the same, so it's intercompany transfer.

12:09Okay, so, all right. So when you're the head of the Central Bank of Canada, by the way, do you get your signature on the currency? Yes. Wow. So that's pretty nice when you hand somebody a dollar bill. You say to people, it's my signature. You ever tell them that? Well, I don't. You don't write brag? Okay. No. All right. So you get offered to go to be the head of the Central Bank of England, and you said yes right away? I didn't, actually. I turned it down a few times. It was a rolling conversation over the course of 2020. So you ultimately took the job. I then took the job. Yeah, I eventually took the job.

12:45for about eight years? Yeah, just under. And when you're the head of the Central Bank of England, does the Queen call you for advice or does she ever ask you anything? Do you ever meet the Queen very much? I did have a few audiences. And the Prime Minister, he or she doesn't appoint you. You're appointed by the Sovereign, yeah. By the Sovereign. Yeah, it says greetings. But who do you report to the Board of Governors, I assume? Well, I mean, you report to the British people, really, through Parliament. That's really the accountability. I mean, you can only be removed for incapacity, and that is a very...

13:26Did you enjoy that? Job, job? Job security? The job of being the head of the Senate. Did I enjoy that? It was, yes, I did. I mean, it was sometimes in the thick of it. It doesn't feel enjoyable, but it was incredibly challenging. There was a lot going on, which is the reason why an outsider came in. So, yes, I did enjoy it. So was it more fun to be the head of the Central Bank of Canada or the Central Bank of England? I would say the challenges were much greater in the UK. You had an institution that had been totally transformed. You had a financial system that was at the epicenter of the problems and had to be fixed.

14:08You had the elements of Brexit, what ultimately was Brexit, the Scottish referendum. You had a big management challenge. So it was... Oh, you enjoyed it? I enjoyed it, yeah. So you would recommend that job to anybody that gets offered it, right? I did recommend it to... I recommended it to a number of people, yeah. Not too long from now, the next meeting of COP will occur. I guess it's in Abu Dhabi or Dubai. And I assume you'll be there as a special envoy. So the last COP meeting didn't seem to make a lot of progress. What kind of progress do you think is going to be made this time? Will we actually get closer to getting to the target goals that you have?

14:45Yeah, well, I think the first thing, let's just back up for one second. So if we go to the Paris COP seven years ago, the world was headed towards 3.5 degrees warming by the end of this century. IEA came out last week, says on current policies, what actually is happening, we're headed to 2.4 degrees. So there has been quite a bit of progress. It's not enough. The goal is to be less than two, but just to be clear, in terms of the scale of investment and the policies that we're making progress. This COP, and full credit to the presidency of the COP, the United Arab Emirates and Sultan al-Jabbar, is very focused on commercial solutions for climate change.

15:26And so first and foremost, an objective to get the major oil countries, producing countries and companies to commit to zero methane, near zero methane by 2030, doubling the efficiency of producing and transporting oil and gas. So you stepped down for the Central Bank of England, and then you ultimately become the special envoy of the UN, and now you're the chairman of Brookfield Asset Management, and now to be the chairman of Bloomberg, right? Yeah. What is Brookfield Asset Management? So Brookfield Asset Management is, and Brookfield as a whole, is one of the world's largest alternative asset managers.

16:07The asset management business is the capital light bit, so this is where the 1 ,200 plus investment professionals of Brookfield reside. We oversee the investments that have 200 ,000 operating professionals. And, you know, it's a business that invests effectively in the backbone of the global economy, so that means renewable power, one of the largest owners operators at renewable power, over 160 gigawatts of renewable power owned, operated and developed, one of the largest real estate investors in the world. One of the pioneers, if not the pioneers of infrastructure as an asset class, so$160 billion under management in infrastructure, and that's everything from energy infrastructure to data infrastructure, big private equity business, and a very large private credit business as well.

17:00Now, you have many jobs currently. You're not the head of the central bank in England anymore or Canada, but among other things, you're the special, I guess, advisor to the UN. Special envoy. Special envoy. Yeah. UN on climate change. Is that right? That's correct. On climate action and finance. Right. So what does that really mean? What are you doing? You're telling the people in each country they should go more electric or don't burn as much oil or what? It's really about, so a lot of, if there's a common theme to my career, it's working at the intersection of public policy and private markets.

17:33So a lot of that in central banking, that's what you're doing. And that's what I'm doing as this special envoy. And really it's to organize the private financial system to be ready for climate change, not just the physical impacts of climate change, but to be part of the solution, to be able to provide capital, get capital to where it's needed to get emissions. So in this position, which I assume is probably an unpaid position. Very much so. You know, people are looking at you all the time and say, you're the special envoy for climate action. You can't fly in a private plane so easily, I guess, right?

18:11And do you take public transportation, or can you drive your own car if it's an oil and gas car or not? Well, it might not surprise you. We have an electric car, as you would expect, and most of the time that is charged in Quebec. I live just on the border with Quebec, and that's therefore 100 % renewable power. Are you conscious of people always looking at you as a special envoy saying, you know, he's using too much, he's got too big a carbon footprint, or you don't worry about that? Well, no, people, look, people will make that, particularly if they don't want to confront the tough issues around climate change, the big blocks of what's actually going to make a difference.

18:46They'll go to, you know, anything you're wearing. You know, there's plastic on my watch strap, and therefore there's an element of hydrocarbons in that. But if you have an oil and gas investment that comes to an investment committee and you're the special envoy, do you have to recuse yourself, or how do you? Well, we have a very clear approach at Brookfield. As I say, we're one of the largest renewable energy providers, and we are systematically going through our assets to ensure that as much as possible they have business plans that are consistent with the transition towards net zero. And we do that first and foremost from a fiduciary perspective.

19:28We see being low carbon or lowering your carbon footprint, to put it that way, as one of the fundamental drivers of value in the market. And I have to say, you know, we're being proven right. We know in real time that the mapping of the temperature increase to the extreme weather events is worse than we thought 10 years ago. So actually the goal, even though the goal is getting tougher to get, it's becoming more important to get there. And the third thing we know is the mapping. You can map specific actions to specific emission reductions, and it can become very clear whether you're making a difference on that.

20:07And what we've seen, I'll make two points if I may on that. One is, we go back five years ago, clean energy investments, so that's wind, solar, battery storage, and let's say EV charging, those types of things, about$500 billion worldwide spent. This year, last year$1.2 trillion, this year$1.8 trillion. Okay, that is one and a half, 1.6 times what we're spending on conventional energy investment. And that's starting to move, you know, so you can see in real time what's happening in terms of emission reduction, solution to emission reduction. And as well, you know, from a financial, we're at Bloomberg, you know, and talking a bit about Brookfield as well.

20:50From a financial perspective, first off, the numbers are huge in terms of, you know, the action is in the clean, not in the conventional. Secondly, the information set around whether or not a company, it doesn't matter what the industry is, it could be tech, it could be motor, whatever, services, the information about what your carbon footprint is today and where it's going is exploding so you can tell who's part of the solution, who's part of the problem, and that is driving value. Some of the emerging market countries say, well, wait a second, you guys in the United States and Western Europe, you had a century or so to pollute as much as you wanted.

21:27that now you're asking us as we're emerging to give away the right to use some of these same kinds of fuels that you use. It's not fair, they would say. What do you respond to that? Well, it's not fair. Unfortunately, the disproportionate impacts of climate change will also fall on those same countries and the people in those countries. You know, Africa is 17 percent of the world's people, 3 percent of the world's emissions run right, but, you You know, hundreds of millions of people will be in uninhabitable climate if we don't get this on top. So we've got to all get together and deal with it, first point.

22:05And then the second is that now, given the progress that has been made in the economics of wind-solar storage particularly, they are becoming the low-cost solutions for those countries as well. You have an electric car. You said you drive an electric car, right? So some people say electric cars are not perfect in the sense that to get the minerals you need for some of their batteries, for example, you have to do a lot of mining of things, and that is not great for the environment either. But on the whole, you would say electric vehicles are infinitely better than carbon vehicles. Well, here we are.

22:39Internal combustion engine. Bloomberg and I can reference BNF research on this, which they actually show, So depending on where you are, where the crossover point is that your electric car net impact on the environment is, you know, where it's better than an internal combustion engine car. If you're in a place like Canada where you've got a lot of clean power, 85 % of our power is zero emission in Canada. A little plug for Canadian manufacturing there, by the way. And the crossover is about 18 months. even if you're in China where you have and still in the install based a lot of coal it's, well I'll have to check on I'll do BNF and check the number but it's around five years.

23:22And that includes the embedded carbon from all those processes. For somebody who's watching who says I'd like to be like Mark Carney, successful at almost everything he's touched, maybe not hockey perfectly but pretty good. What was it? Did you do hard work? It's just being good genes, you know, just smarter than everybody else. What is it, luck, what do you think it is that enabled you to do all these things? And you're still a very young man. By my standards, you're 58 years old. That's a teenager to me. So what do you think made this possible? Well, look, luck is a huge element of it, without question.

24:00You make your own luck to some extent if you're doing things that you like and you care about, so you're around opportunities. You know, I wouldn't have been governor of the Bank of England if I hadn't wanted to be in public policy and was the governor of Bank of Canada, for example. But I, at least in my experience, maybe with my genes or whatever, like, you can't get away from hard work. Thanks for listening. To hear more of my interviews, you can subscribe and download my podcast on Spotify, Apple, or wherever you listen.