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What we learned at the Davos Agenda - a podcast round-up from Radio Davos

Davos Agenda A Conversation with Janet L. Yellen, Secretary of the Treasury of the United States of AmericaJanet L. Yellen, Secretary of the Treasury of the United StatesChaired byKlaus Schwab, Fonder and Executive Chairman, World Economic ForumThe Davos Agenda 2022Geneva - Switzerland, 21 January 2022Copyright ©️ World Economic Forum/Pascal Bitz

Klaus Schwab talks to Janet Yellen during the Davos Agenda Image: World Economic Forum/Pascal Bitz

Robin Pomeroy
Podcast Editor, World Economic Forum
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Stakeholder Capitalism

This article is part of: The Davos Agenda
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COVID 19 might have prevented the World Economic Forum from going to Davos this January, but it didn't stop us going to space.

The online Davos Agenda brought together leaders from governments, business, civil society and science from around the world - and beyond - to discuss how the world will look post COVID.

In this episode of Radio Davos, we listen back to selected highlights from the week - starting with a session live from space!

Episode transcript

Robin Pomeroy: While I sit here talking into this microphone beyond the sky above me, a dozen or so human beings are circling planet Earth in the International Space Station. It's hard to comprehend what that must be like. So, a highlight for me from this year's virtual Davos meeting was a live link-up with the space station. Astronaut Matthias Maurer said that looking down on Earth, he sees humanity as a crew in charge of a planet, which is, in a way, itself a spaceship — one that needs careful handling and global cooperation.


Matthias Maurer: We launched this project [International Space Station] 21 years ago and people have been living here ever since. People from a lot of different nations, different languages, different cultures. And it works — we all work together. We are one team and I wish we could extend this cooperation, this success, to many more projects and also especially to the very important projects like fighting climate change.


Robin Pomeroy: And that's really what the Davos Agenda was about, bringing people together from around the world to address those big challenges that the world faces. You can hear all of that interview with astronaut Matthias Maurer on a previous episode of Radio Davos and watch it on our website, where you can catch up with the whole of the Davos Agenda Week. But on this podcast, I'm bringing you just a flavour of the discussions. Kicking us off: World Economic Forum founder and Executive Chairman Klaus Schwab setting out the top challenges


Klaus Schwab: At this pivotal moment, I see several priorities for the global agenda. We must continue to fight against the global pandemic. We must revitalise the global economy and accelerate its transition to net zero. We must preserve biodiversity by deploying nature-based solutions, and we must know the gap between the rich and the poor, to achieve more sustainable global development.

Robin Pomeroy: Klaus Schwab. And, as this is the World Economic Forum, let's look at the topic of the global economy. To start off, this is Antonio Guterres, Secretary-General of the United Nations.


Antonio Guterres: The world is emerging from the depths of a paralysing economic crisis, but recovery remains fragile. And then, even amid the lingering pandemic, persistent labour market challenges, ongoing supply chain disruptions, rising inflation and looming debt traps. Not to mention the geopolitical divides. And as a result, we see recovery slowing down quite substantially, and all of these threaten hard-won progress in advancing the 2030 Agenda and the Sustainable Development Goals, our key projects. The last two years have demonstrated a simple but brutal truth: if you leave anyone behind, in the end we leave everyone behind.

Robin Pomeroy: One of the many special addresses of the Davos Agenda week, that was the UN chief Antonio Guterres, speaking about the economy. And there was a session called Global Economic Outlook. Here is the International Monetary Fund's head, Kristalina Georgieva, setting out her assessment.


Kristalina Georgieva: 2022 is like navigating an obstacle course with all the risks: inflation, COVID continuing,and high debt levels. So what do we anticipate for 2022? On the good news side, we anticipate the recovery to continue, but it is losing some momentum and it is faced with the renewal of infections. On top of them, the persistent, much more persistent than anticipated, inflation. And on top of it, record-high debt levels — $226 trillion in debt.

On inflation, we need to understand why inflation is higher and more persistent in many places. And when we understand the reasons, it would be clear that it is not just for central bankers to fight it. If you look at the reasons for inflation: one is demand surging, with supply falling behind and supply interruptions primarily caused by COVID, by restrictions that are associated with the waves of COVID still with us. The pressure on prices comes from food prices shooting up, to a certain degree because of climate impacts, and because of energy prices shooting up. This is a very complicated story in which there is also an element of geopolitical tensions. And then we have a phenomenon that is strictly related to the pandemic, and it is the fact that labour markets are changing. We see that everywhere, but especially in countries where unemployment has fallen quite significantly.

Robin Pomeroy: So is 2022 the year inflation roars back as a global problem after years when, in many parts of the world, it barely existed. European Central Bank President Christine Lagarde, who called the pace of the post-COVID economic rebound "staggering", has this to say on inflation.


Christine Lagarde: We have to ask ourselves, where is it coming from? Is it likely to last? And we are trying to figure out how long it will last, because that is going to be critical in really composing the policy response that will be needed. And what do we see under the numbers? Well, we see 50% energy prices. And, as Kristalina alluded to, it is not just the recovery, it is also geopolitical factors that are critically important at the moment, unfortunately. It is also some idiosyncratic factors. It is some weather-related factors. And the rest, essentially, taking out a few base effects that will eventually clear out in the next month, actually, we see a lot of this super-strong recovery that has outpaced supply, which was constrained. And as a result of that, you all, we all, talk about the bottlenecks, the congestion of ports, the lack of truck drivers and what have you. So then you ask yourself: these two big factors, are they going to be with us for the long term? Are they going to affect this inflation number and make it sustainable? And will that dictate our monetary policy response?

Robin Pomeroy: Vital questions for the heads of central banks who have the task of taming inflation if he gets too high. So does Lagarde think current inflation is a blip or here to stay?

Christine Lagarde: We are not seeing this sustainable movement that would lead to inflation is spiralling out of control. On the contrary, we assume — and again, lesson of humility here, there is a lot of uncertainty about it — but we assume for the moment that energy prices will stabilise in the course of '22, that those bottlenecks, some of those congested ports and drivers missing in action, and all the rest of it, will also stabilise in the course of '22, and that gradually those inflation numbers will decline.

Robin Pomeroy: Janet Yellen used to be Lagarde's counterpart in the US as chair of the Federal Reserve. She's now secretary of the Treasury of the United States and, in a conversation with Klaus Schwab, this is what she had to say about inflation.


Janet Yellen: Professional forecasters think that inflation will substantially abate next year. Part of this view is likely driven by the expectation that the Federal Reserve will continue to account for these pressures as it fulfils its dual mandate. As the president has remarked many times, the administration continues to tirelessly seek strategies to alleviate these pressures, to actions such as easing congestion in our ports and expanding the labour supply. Yet, even as policymakers continue to address rising prices, our economic recovery will face significant risks until we have moved more decisively past the pandemic.

Robin Pomeroy: Janet Yellen. But back in the discussion with regard to the Brazilian economy Minister Paulo Guedes said Western governments were being too optimistic about inflation.


Paulo Guedes: I don't think inflation will be transitory at all. I think these supply adverse shocks will fade away gradually, but there's no arbitrage anymore to be exploited by the Western side. So I think the central banks are sleeping at the driver wheel. They should be aware, and I think inflation will be a problem, a real problem, very soon for the Western world.

Robin Pomeroy: So, as the world seeks economic growth without runaway inflation, what about the impact on the environment and wealth creation and job creation happen without destroying the Earth, which will mean getting to net-zero greenhouse gases by 2050. This is Bill Gates talking about how to get whole industries to switch to green technologies — even in areas where those technologies are new and costly.


Bill Gates: In the end, it really does come down to economics. The dirty way of making things is very mature, you know, whether it's steel or cement or aviation fuel. And we have to, you know, make it far more economic investment now in those breakthroughs is at an all time high. You know, we went from 2015 where there was very little money going into these things, now we have over 10 times as much. And so pairing those new technologies up with the big companies that have skills to build those things at scale, I see that as the urgent agenda. That's where Breakthrough Energy Catalyst is working with each of the members of the First Movers Coalition to say: 'OK, what projects can we start and fund that will bring those costs down?'

Robin Pomeroy: The First Movers Coalition that Bill Gates was talking about, there is a drive by the World Economic Forum and the US government to get big companies to commit to green technologies as a way of creating demand for those technologies, which might not yet exist or exist at scale. We did a podcast on the launch of the First Movers Coalition from COP26 last year with US climate envoy John Kerry. John Kerry was also at the Davos Agenda, and he had this to say about climate change and coal.


John Kerry: 20 countries equal 80% of all emissions. Twelve of those countries are amongst that 65% that says we're going to get on track to do 1.5. So our target universe now, in terms of shifting rapidly, is frankly about eight countries. And we know that China, we've heard from President Xi in the last days, and he's committed to continuing to work globally to try to deal with this. And we've entered some sort of a partnership to begin to do it. But we have to help countries be able to wean themselves from coal. It's not enough just to sit here today and say, Hey, you got to get off coal. How are they going to do that? How do South Africa or Indonesia or India, where they have a huge percentage of their energy base comes from coal? How do we move them more rapidly?

Robin Pomeroy: An idea of helping economies and people transition to clean energy was reiterated by European Commission President Ursula von der Leyen in her address to the Davos Agenda.


Ursula von der Leyen: People need to trust that the transition will support the most vulnerable. Businesses need to trust that the transition will improve their competitiveness. And investors need to trust that we will stay the course whenever there are bumps on the road. There will never be a linear shift from a fossil fuel-based system to the clean energy system. We must be upfront about that. But the direction is clear and so is our commitment. As we respond to this gas crisis, we will focus on protecting those most affected, we will accelerate the transition and we will ensure that we have the reliable suppliers we need.

Robin Pomeroy: And we heard from Germany's new leader, Olaf Scholz, saying he'd use his term as head of the G7 group of countries to push for climate action.


Olaf Scholz: We will use our presidency of the G7 to turn that group into the nucleus of an international climate club. What we want to achieve is a paradigm shift in international climate policy. We will no longer wait for the slowest and least ambitious. Instead, we will lead by example and we will turn climate action from a cost factor into competitive advantage by agreeing on joint minimum standards. Ambitious, bold and cooperative — that will be the climate club's ABC.

Robin Pomeroy: The view from some governments there. But what about companies? Many companies want to be greener or to be seen as being greener, either because it's the right thing to do, or because that's what's increasingly being demanded by their consumers and their investors. This is what Klaus Schwab, the founder and executive chairman of the World Economic Forum, has called 'stakeholder capitalism' — an economic model where companies pursue more than just profits and share price increases. Incidentally, we recently produced a five-part video podcast on that. Search for 'stakeholder capitalism' on your podcast app.

But back to today's episode at the Davos Agenda. Business leaders discussed how we can measure if companies are living up to their promises on ESG, on environment, social and governance issues. Brian Moynihan, Chairman and Chief Executive Officer of the Bank of America, has been working with the World Economic Forum and the Big Four accountancy firms on just that.


Brian Moynihan: The metrics were designed in an effort by the International Business Council, with the Big Four accounting firms with the World Economic Forum team to basically take a look across all the metrics that existed out there and consolidate them into a platform, which importantly aligned to two basic things. One was to the Sustainable Development Goals, which is what the world wants your development to be like. And then secondly, frankly, to define and measure what stakeholder capitalism is, because a debate had begun. Well, you all talk about it, but how do we know you're doing it? And the answer was: here's a set of metrics. As you get these things standardised and investors won't be confused, then society won't be confused. Then people will be able to be held accountable in a consistent fashion, and that's the goal we have.


Robin Pomeroy: So why would companies choose to report on their environmental performance and potentially open themselves up to scrutiny and criticism that they might otherwise avoid? Business leaders said there was a carrot and a stick. This is Julie Sweet, Chair and Chief Executive Officer of consultancy firm Accenture, who says companies act now to embrace stakeholder capitalism will do better than those that don't.


Julie Sweet: This is about competitiveness and the reason the private companies, are going to come along is because this is how they're going to win. Everything that we've seen, the research we've done, says that the trillion dollar question is how do you operate sustainably and make money? And those companies who have embraced sustainability are more profitable, they have a higher total return to shareholders.

Robin Pomeroy: And the stick — Frans van Houten, Chief Executive Officer of manufacturing conglomerate Royal Philips, said having reliable ESG metrics would mean regulators could impose a price on, for example, carbon emissions, something he welcomes.


Frans van Houten: Eventually, once we have transparency on ESG metrics, there needs to be a cost to not being sustainable, a cost to being wasteful, a cost to carbon emissions. Carbon pricing should then make their way into the cost prices of the products. And that will, I think, help then the consumers who are less involved around making the right choices.

Robin Pomeroy: Watch all of that discussion on our website. It's called 'ESG Metrics for a Sustainable Future.' Now, the Davos Agenda kicked off with speeches from the leaders of the world's two most populous countries. And although here, we'll have to listen to them through an interpreter. I thought it was well worth listening in to some of what they had to say. This is Indian Prime Minister Narendra Modi.


Narendra Modi: Given the global landscape today, the question that also arises is whether multilateral organisations are able to address the new world order and new challenges. Are they still capable of doing so? When these institutions were created, the situation was quite different. Today, circumstances have changed. They are very different. Therefore, it is the responsibility of every democratic country to focus on reforms of these institutions so that we make them capable of addressing present and future challenges.

Robin Pomeroy: And on a similar topic, Xi Jinping, President of the People's Republic of China.


Xi Jinping: Countries around the world should uphold true multilateralism. We should remove barriers, not erect walls. We should open up, not close off. We should seek integration, not decoupling. This is the way to build an open world economy. We should guide reforms of the global governance system with the principle of fairness and justice, and uphold the multilateral trading system with the World Trade Organisation at its centre. We should make generally acceptable and effective rules for artificial intelligence and digital economy on the basis of full consultation, and create an open, just and non-discriminatory environment for scientific and technological innovation.

Robin Pomeroy: Speaking through an interpreter, Xi Jinping, the President of China. Now, both of those leaders were talking about global bodies and how they should be reformed. Here's the head of one of those bodies, Ngozi Okonjo-Iweala, Director-General of the World Trade Organization.


Ngozi Okonjo-Iweala: We do have international institutions to strengthen trade and strengthen supply chains. The issue is whether these institutions are fit for purpose. And, what I would say, I can talk about my own institution — a wonderful one which underpins transparency and a level playing field in multilateral trade — but there is a lot of work to be done in order to strengthen the trading system and be fit for the future of trade.

Robin Pomeroy: Ngozi Okonjo-Iweala also made the point that global bodies such as the WTO don't just need to work well — they need to work in a way that benefits normal people.

Ngozi Okonjo-Iweala: What is the good of trade if it doesn't speak to the lives and livelihood of ordinary people? It's not about just the elite or those making people rich, but we need to look at how does it benefit poor people within rich countries, and poor countries in the world? And how do we include them and integrate them into the global trading system?

Robin Pomeroy: There are many other big issues addressed at the Davos Agenda: vaccine equity, stakeholder capitalism, technology, plus special addresses from leaders around the world — many of whom we've not had time to listen to here. But let's end where we started: in space. This is former US Vice President Al Gore, who is a champion of using space technology to help monitor and combat climate change. This is Al Gore talking about the latest technical wonder up there, the James Webb Space Telescope.

Al Gore: The James Webb Telescope is unfolding right now and will give us a chance to see into the distant past, to see the first moments of the universe's emergence. But we have to use our moral imagination to see the future of humanity and to see the grave danger that is posed by all of the global warming pollution that we're putting into the atmosphere every day.

Robin Pomeroy: Al Gore. You can find all of the action from the Davos Agenda on our website and there are lots of links in the article that accompanies this episode. Please subscribe to Radio Davos wherever you get your podcasts and leave us a rating or review if you liked it and join the conversation on the World Economic Forum Podcast Club. Look for that on Facebook. This episode of Radio Davos was written and presented by me, Robin Pomeroy, studio production was by Gareth Nolan. We'll be back next week, but for now, thanks to you for listening and goodbye.

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