Who to turn to when the world is crumbling

This is an audio transcript of the FT News Briefing podcast episode: ‘Who to turn to when the world is crumbling’

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Marc Filippino
Good morning from the Financial Times. Today is Wednesday, October 25th, and this is your FT News Briefing.

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Alphabet’s third-quarter earnings did not sit well with investors. Environmentalists are pretty unhappy with the European Union’s plan for hydrogen projects. And the head of the United Nations is adding to the pressure for Israel to stop bombing Gaza. Plus, the FT’s Arjun Neil Alim says that companies are looking for help with geopolitical issues. Why?

Arjun Neil Alim
Well, the bad news is that the world over the last 30 years has become a much more unstable place. You have Ray Dalio of Bridgewater saying this week that he sees the likelihood of a global hot war at 50 per cent.

Marc Filippino
I’m Marc Filipino, and here’s the news you need to start your day.

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Investors took Alphabet’s earnings report with a glass half-empty sort of approach. Google’s parent company said yesterday that its cloud division narrowly missed sales forecasts. But Alphabet did say advertising revenue did better than expected in the third quarter but wasn’t enough to stop alphabet shares from falling 6 per cent in after-hours trading, though. Microsoft had a better day. It said its cloud computing platform beat estimates. Investors were all glass-full on that one, and Microsoft’s share price jumped about 5 per cent after the bell.

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The European Union’s strategy for cutting carbon emissions is moving in the wrong direction. That’s according to environmental campaigners. They say a list of priority energy projects that the commission is discussing today amounts to a, quote, wish list, for oil and gas majors. Alice Hancock covers energy and climate policy in Brussels for the FT. She joins me now. Hey, Alice.

Alice Hancock
Hey, Marc.

Marc Filippino
All right. So, first of all, what is the list of priority energy projects that campaigners are referring to?

Alice Hancock
So the list of priority projects is called the Projects of Common Interest list, and it’s selected every two years. And these are projects that are considered crucial to the EU’s energy infrastructure for energy security. And following a revision of the criteria in 2022, they are also going to be projects that will help decarbonise and help the bloc meet its climate targets and decarbonisation goals.

Marc Filippino
Energy campaigners, though, they seem pretty upset with a lot of the projects. What’s making them so unhappy?

Alice Hancock
So the issue that the environmental campaigners have is that half of the roughly 150 projects being considered are for hydrogen, which, in many way, is great. Hydrogen is going to be a key energy carrier for industries like steel and chemical production. But the problem is that hydrogen is also very unproven at the moment. We’re not exactly sure how the infrastructure can be built. And if you can change current gas infrastructure to be used for hydrogen in a cost-effective way because hydrogen molecules are very different to gas molecules. So their fear is that on this list there are all these projects which are proposing to change current gas infrastructure into ultimately hydrogen infrastructure. Their argument is that this is basically allowing gas companies to continue using their gas infrastructure for as long as they want in the promise that one day, in some lovely future, it’ll be used for hydrogen.

Marc Filippino
I see. So if not hydrogen projects, what are the alternatives that campaigners want to see?

Alice Hancock
Well, their argument is that, you know, more should be focused on electrolysis, which is for the actual production of hydrogen, rather than gas pipelines that could maybe become hydrogen pipelines. They’d also like to see more on grids, interconnectors from offshore wind farms, you know, better sort of concentration on getting renewable power off the ground.

Marc Filippino
So, Alice, just how significant is this list of hydrogen projects compared to the EU’s already existing energy strategy?

Alice Hancock
These projects are, you know, seen as the big, strategic projects for the EU. So it is significant, and it means handing out billions of years of subsidies, in some cases, to some of these projects. It also gives a bit of a signal to the industries about which sort of technologies the officials think are the key technologies for the future. In other ways, yesterday, the Commission put out a package designed to sort of boost the wind sector in Europe, which is seen to be having a really tough time, and it wants to make sure that what was once the jewel of a European industry, which is now struggling, is given the proper attention. So the commission really is pushing on all fronts.

Marc Filippino
Alice Hancock covers energy and climate policy in Brussels for the FT. Thanks, Alice.

Alice Hancock
Yeah.

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Marc Filippino
The UN secretary-general had some harsh words for Israel yesterday.

António Guterres clip
I’m deeply concerned about the clear violations of international humanitarian law that we are witnessing in Gaza. Even war has rules.

Marc Filippino
António Guterres spoke on Tuesday during a meeting of the UN Security Council. He said that the safety of civilians was the most important thing.

António Guterres clip
The relentless bombardment of Gaza by Israeli forces, the level of civilian casualties and also destruction of neighbourhoods continue to mount and are deeply alarming.

Marc Filippino
Guterres called on Israel to halt its strikes in Gaza. EU leaders are also expected to call for a pause in hostilities later this week.

António Guterres clip
At this critical hour, I appeal to all to pull back from the brink before the violence claims even more lives and spreads even further. Thank you very much.

Marc Filippino
Meanwhile, the US and other western allies are growing more concerned that Israel doesn’t have an exit strategy. Palestinian authorities say that around 6,000 people have died in Gaza. Israeli authorities say that roughly 1,400 people died in Hamas’s attack on October 7th, and more than 200 are still being held hostage.

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The world is a risky, dangerous place right now. And that has businesses searching for advice. More and more, they’re turning to what would otherwise be some unusual experts, like former diplomats. Here to talk about how companies are navigating this new world is the FT’s Arjun Neil Alim. Hi, Arjun.

Arjun Neil Alim
Hey again, Marc.

Marc Filippino
OK. So what are some of the risks companies are navigating right now?

Arjun Neil Alim
Well, the bad news is that the world over the last 30 years has become a much more unstable place. You have Ray Dalio of Bridgewater saying this week that he sees the likelihood of a global hot war at 50 per cent. This is led by the wars in the Middle East that we’re seeing, the first land war in Europe in 50 years. You have these supply chain tensions between China and the US, China and Taiwan. Meanwhile, companies have become more globalised, especially western companies. You know, in the past you might have had your back office in the same country as your front office, which might be the country you do most of your sales. But now, so many more companies have become diversified across the world.

Marc Filippino
Yeah, I mean, what comes to mind when you say that is companies de-risking or decoupling from China. We talk a lot about that on the show. So who exactly are companies calling for help on these issues?

Arjun Neil Alim
Well, they’re looking at former public sector officials so diplomats, foreign service officials, former spies, people who’ve had experience in the front lines of geopolitics and are now looking for, you know, a slightly cushier role in the private sector. Some types of companies have always done this. The oil and gas sector is a good example. These are companies that operate in often dangerous parts of the world or unstable parts of the world, for example, the Middle East, west Africa, parts of Latin America. What’s new is that different types of companies are thinking about this now. For example, construction companies. So one person I spoke to was Ryan Maibach, the CEO of Barton Malow, which is a 3,000-person construction company in the US. It’s not necessarily the company you would think is the most concerned about geopolitics. But Ryan himself told me, you know, it’s fair to say the state of the world went from relative stability and order to far less stable. And this disruption definitely has implications for business.

Marc Filippino
Arjun, the companies that you talked to, people like Ryan from Barton Marlow, how are they viewing this shift towards greater awareness of geopolitical risk? Are the wars in Ukraine and now in Gaza just blips or is this type of thing something more permanent?

Arjun Neil Alim
From my reporting, it sounded like companies across the world are seeing this as a shift towards a more unstable world. And that means that companies really have to start thinking carefully about their exposure in their supply chains, in their target markets or anything else. And it is linked to the end of US hegemony. So this is something companies are taking very seriously. As countries are less confident in the US-led order and speaking to the CEO of, you know, a mid-cap public company that does 90 per cent of its business in the US, he told me, you know, he’s thinking very carefully about geopolitics. He worked with a geopolitical adviser to map out, you know, the impact of a crisis on his business. I think that was really, really interesting because it really did hit home the fact that it’s not just asset managers and oil companies that think about this now.

Marc Filippino
Arjun Neil Alim covers asset management, wealth and retail investing for the FT. Thanks, Arjun.

Arjun Neil Alim
Thanks for having me, Marc.

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Marc Filippino
You can read more on all of these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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