Roman Dubczak of CIBC Capital Markets joins Dominique Barker to discuss the growth of Sustainability Advisory, how we are evolving the conversation with our clients, and our priorities for 2023.
Dominique Barker: Welcome to The Sustainability Agenda, a podcast series focusing on the evolving complexities of the sustainability landscape with a view on addressing current issues in a concise format to help you navigate and take action. I’m your host, Dominique Barker. Please join me as we explore today’s most pressing matters with special guests that will give you some new perspective and help you make sense of what really matters.
Roman Dubczak: The areas now that are evolving is carbon, as you could call it an asset class. You could call it a commodity, you could call it a risk. But nonetheless, it’s something that needs to be managed by our clients along the lines of interest rates, commodity prices, foreign exchange. These are factors that a modern CFO, CEO, treasurer, etc. need to be looking at.
Dominique Barker: Today we welcome Roman Dubczak, Deputy Chair at CIBC Capital Markets. Roman is responsible for senior client relationships and strategy, as well as all the strategic opportunities that can emanate from CIBC Capital Markets. Today also marks CIBC Sustainability Agenda’s 50th podcast episode. Roman was our first ever guest for the inaugural episode back in March 2021, so I’m delighted to have him join us today. For this 50th episode, we have a lot to review from the past almost two years. We’re going to discuss the growth of sustainability advisory, how we’re helping our CIBC clients to transition to a low carbon economy and the outlook for the next 12 months. Good morning, Roman, and thank you so much for joining on this 50th episode of The Sustainability Agenda.
Roman Dubczak: Well, great to be here. Dominique, It’s hard to believe it’s 50 episodes in the span of time. It’s been a very productive period for for you and the team. So congratulations on this milestone.
Dominique Barker: Yeah. And you. Thank you. So in this episode, we’re going to discuss a number of things, including your motivation back almost three years ago to focus on sustainability. How do you see this changing our approach with clients and our opportunities for growth? And I relisten to our podcast that we recorded, and I noted that you said it’s an exciting time to be in corporate finance in reference to the transition to a low carbon future. Do you still feel that way?
Roman Dubczak: Yeah, I do. It’s always exciting to be in corporate finance and I think since that first episode, the world has changed just in unbelievable ways, just obviously geopolitically, economically. And both of those have had substantial impacts on what the world needs to be doing in terms of sustainability and getting to a lower carbon future. Like, I wouldn’t have predicted the path, but if I had to draw a line from where we were there to where we are now, I’d say progress has been made. Like I said, in a different route than I would have anticipated. But there’s a lot to do still. But I think the foundation of where we need to be going is is substantial, positively oriented and has momentum.
Dominique Barker: Yeah, I completely agree. And I think we’ve been lucky that we had some tailwinds, which we’ll probably maybe get to today that have impacted us positively. What aspects of sustainability advisor sustainability have really exceeded your expectations, or perhaps I should say, you know, any surprises for you and maybe you can discuss why.
Roman Dubczak: Yeah, well, look, I think you always make decisions and interpret opportunities based on the point in time in which you make those and what’s fed into those. And at the time, if you’re in March of 2021, during COVID, the world was working at the cadence. It was at that point. And I think the way you and I looked at Sustainability Advisory and we use the term colloquially, I guess the denominator effect, meaning improving our clients cost of capital by focusing on the denominator, the discount rate, if you will, based on their activities. And a lot of it was focussed on sustainability advice, sustainability ratings. Remember those like that was a big topic of conversation two years ago, a year and a half ago, and charting a course for our clients on what they needed to keep an eye on going forward. And so we are forward now. And where, where are we? And it’s just completely different because now we are speaking to our clients on a variety of basis, be it sustainability finance, which wasn’t so much a thing back then as it is now. It’s a legitimate area of finance that we have a big team focusing on, but there’s also opportunities as it relates to carbon trading, carbon acknowledgement of carbon, carbon trading, carbon strategy. Governmental participation in this process was obviously on a well-thought-out basis. You would have said yes, eventually governments are going to have to get involved here. But really energy transition as it’s evolved, the investment in it, the high capital costs involved don’t occur without government participation. And you see that manifested in what the federal government in Canada has been doing, both in terms of its kind of evolving commitment from the budget and the fall economic statement. And now we have another budget ahead of us and a variety of programs that have been put in place and certain agencies changing their mandate to lean more into energy transition. And then the granddaddy of them all, if you want to call it that, is the US and the Inflation Reduction Act and the amount of capital that’s being allocated to energy transition in the United States, which is leading the world and forcing other jurisdictions to kind of compete with the incentives that the United States government is putting in in place for energy transition. And it’s not just the Inflation Reduction Act. There’s also the CHIPS Act and the JOBS Act in the US that’s allocating capital to energy transition. So as a result, we’ve responded and we’ve put much more of an emphasis on navigating legislation and actually governments and helping our clients sort out what the programs are, how best to exercise those and explore new technologies, which is really exciting right now. To get back to your question about corporate finance, it’s very exciting, but in a different way today than it was a year and a half ago.
Dominique Barker: I always like the way you described. The problem that we’re solving is helping our clients figure out how to reduce their cost of capital. So really thinking about the denominator. And now as you talk about how we’re moving into really sustainability 2.0, it’s really focussed on the numerator. So those opportunities and you know, we you and I have talked about this inevitable policy response and the IRA or Inflation Reduction Act is certainly an embodiment of that theory, and I predict that there’s going to be more. I just saw a headline this morning about some EV tax measures that are being contemplated in the US and our partner Nav Bains wrote about what Canada needs to do in order to remain competitive. So there’s I think there’s a lot watch the space as you’ve mentioned, the importance of government in sustainability. Roman you’ve recently moved to the role of Deputy Chair and maybe you can discuss some of the priorities for 2023 and where you see some of the biggest opportunities and challenges.
Roman Dubczak: Well, I certainly think energy transition is right in the middle of the sights of our clients, all of them, and managing that. And so that is more than enough to occupy our one’s day and an entire franchise. And so we’re very, very focussed on that globally as a bank and specifically on the capital markets side with a variety of teams working on that, enabling our clients, sorting through the issues. But then really the other thing to sort of add to the previous question is executing and we are in execution mode. You know, obviously we’re well into the evolution of sustainable finance. You know, we’ve got teams devoted to green bonds, sustainable bonds, sustainability linked loans, green loans and others. So I would say that’s an area that in the last year and a half, if you want to use that time frame, has really evolved and is almost normal course as it relates to a mature capital markets platform. You know, the areas now that are evolving is carbon, as you could call it, an asset class, You could call it a commodity, you could call it a risk. But nonetheless, it’s something that needs to be managed by our clients along the lines of interest rates, commodity prices, foreign exchange. You know, these are factors that a modern CFO, CEO, treasurer, etc. need to be looking at. And to use the financial statement analogy, you know, it’s gone from balance sheet management, if you will, and obviously that sustainable finance and others factor into that. But it’s kind of in the realm of the income statement and helping clients manage optimising their revenues or lowering their costs of doing business and big, big, big focus for us and, you know, other very, very large trends, significant trends that have continued to evolve or really accelerated in the last few years have been the infrastructure continued infrastructure investment. We saw that particularly in health care and other forms of of government support and development in both the Canadian and US contexts that we’re focussed on the shift from public to private markets, especially in the last few months with the volatility in the public markets. That was always a trend and I think it’s been a bit exacerbated in this context and the concentration of capital in private hands versus public markets continues. I don’t see that abating in any way. I have mentioned government engagement and I think that is something that we’re very focused on building out our capabilities and our team and we’ve got great partners with the addition of Lisa Raitt and Nav Bains done a great job of raising our game as it relates to engagement of our clients with, with governments and our just the knowledge of how governments operate. And then the new one that is the new trend, which is an unfortunate offshoot of the conflict in Ukraine, is reshoring and friend sharing and the complete reset. I feel comfortable calling that of investment, capital investment. To take out some political risk as to one where one’s supply chain comes from, and no better example of what, than what the United States government has done with the CHIPS Act and bringing a lot of semiconductor manufacturing onto the shores of the United States. And maybe equally so, a little quieter than the chip side is the offshoring of photovoltaic cell manufacturing in the United States. So that’s also a very significant supply chain issue that’s being addressed. You know, those investments are being made now. So that has a profound influence on the economies. I speak specifically about North America because I use those two examples and the service providers related to those investments. So if you look at the S&P 500, it’s the Wilshire 5000 that’s actually going to be influenced by reshoring or offshoring less than the larger entities. But that from a from our client’s perspective, is a great opportunity going forward. So we’re focussed on making sure our franchise is tightly aligned to the trends that our clients are facing.
Dominique Barker: Right. And Roman, maybe we can just finish off with In our inaugural episode, you mentioned a book that was personally impactful to you, and that was We Are The Weather by Jonathan Safran Foer. And after that episode, I did read the book and it’s an excellent book and I recommend it to everyone. I was wondering, do you have any other books you would I know you’re a big reader, avid reader. Any other books or materials that you would recommend to our listeners that are influencing you?
Roman Dubczak: Yeah, no, I would say, much like Jonathan Foer influenced my diet in terms of shaping my views. Exactly. It’s good to read, worth rereading at times, but I would say the one that I would point everyone in the direction of is Speed and Scale by John Doerr. Yes, I think that book I’ve read it and I’ve listened to it in audible format and it really it made sense a while ago because John applies a very practical application to how to just get things done, big things done. And but if you look at what the US government has done with the IRA, and I was just kind of reviewing it on the weekend, just reading something, it sounds like they paid attention. It sounds like they’ve gone quickly on all the incentives and the IRA are short fused, like get this thing built by 2025, 2029, 2030, 2035, very quickly and scale big money going at it. So. You know, not only is it a good read, but I think it will give you a chart the course as to how the big system, governments, industry and others are really addressing climate change and energy transition. And I think it is a you know, whether it’s perfectly precise or not, it we’ll see. But I thought it was just very well thought out. So it’s not a hard read or hard listen. And it suggests that for everybody to spend some time with, because I think that’ll, like I said, it’ll explain how this is evolving in the next year or so. 50 podcasts from now, maybe we can review and see how well that one.
Dominique Barker: I would completely concur the book, Speed and Scale is, I think, highly recommended reading and is a great blueprint of what needs to be done and what capital needs to be mobilised and where in a pretty concise plan. So that’s a great recommendation. Thank you very much. Roman. Thank you for taking the time to join our show today and thank you to our listeners for listening in.
Roman Dubczak: Great. Thanks, Dominique.
Dominique Barker: Please join us next time as we tackle some of sustainability’s biggest questions, providing different perspectives to help you move forward. I’m your host, Dominique Barker, and this is The Sustainability Agenda.
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