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How governments, corporates and investors can unlock a brighter future
In this episode of the Government Insights podcast, host Kait Borsay discusses with her guests how governments, corporates and institutional investors can strengthen collaboration for a more sustainable future.
In this episode of the Government Insights podcast, host Kait Borsay discusses with her guests Guéric Jacquet, Partner at EY-Parthenon, and Barry Perkins, Global Strategy and Transactions Lead Analyst, how governments, corporates and institutional investors can boost collaboration with the goal to unlock a faster acceleration toward a sustainable future. Together, they also look at the findings from the latest EY CEO Outlook Pulse survey.
Enhance collaboration between public and private sectors to accelerate sustainable infrastructure investment, focusing on green energy and managing climate impact.
Engage in continuous dialogue with governments and investors to create policies that support corporate sustainability efforts and attract institutional investment.
Embrace economic models that encourage public-private partnerships, leveraging financing, funding, and risk management to drive private capital allocation in infrastructure.
Teaser
Government Insights from EY-Parthenon.
Kait Borsay
Hello and welcome to Government Insights, a new EY-Parthenon podcast series for government leaders around the world. I'm your host, Kait Borsay, and we'll be exploring how governments can transform to strengthen services for their citizens.
Borsay
In this episode we're looking at the EY CEO Outlook Pulse Survey and focusing on the topic of better collaboration between government and corporates.
Joining me, Barry Perkins, EY CXO Insights Analyst, EY Global Services Limited. Hello to you, Barry.
Barry Perkins
Hi there, Kait.
Borsay
And Guéric Jacquet, Partner, Public Sector, Ernst & Young Advisory. Bonjour Guéric.
Guéric Jacquet
Bonjour, Kait.
Borsay
Lovely to have you with us. Barry, let's start with you. You're one of the co-authors of the latest EY CEO survey report, 1200 CEOs globally participate in this. What does the survey set out to do?
Perkins
What we do is and we run the survey on a quarterly basis. We try and understand how CEOs are viewing, not only their own performance, the performance of the global economy and what's happening in their sector but try and understand what are really hot topics of the day. And our focus in this survey was really to try and understand how governments, corporates, and institutional investors can unlock a faster acceleration towards a sustainable future. But really, what each wants the other parties to do in order to be able to achieve that aim.
Borsay
Ok, Guéric, this May 2024 edition of the survey includes the views of 300 institutional investors. What actions do they want corporations to focus on over the next few years.
Jacquet
So, I think this is really interesting to compare the CEO respondents and the investor respondents. Indeed, there is a slow growth, and this economic context shows waiting attitudes, and wait and see attitude from the investors. They are looking for investment opportunities. They have money to do that, but they don't find affordable and profitable projects in order to invest.
It's interesting to see that they are focusing on diversification projects and protecting revenues of their companies that they have in their portfolio. We know that there's some doubts about the green transition and the green agenda for the investors. And 32% of the investors saying this is a lower priority today for the companies in their portfolio.
So, this is a key question for the government, I think, how could they invite the investors to support initiatives in order to fuel the growth, invest and continue their efforts in order to accelerate the transition. And today there is a momentum to do that.
Borsay
Let's look at how investors, governments and corporates are working together. Barry, what are the opportunities then for public and private sector collaboration and investments in 2024?
Perkins
It really is around accelerating the transition and putting in place the infrastructure that will enable that to happen. So, both corporates and institutional investors see the opportunities of working better together in a more collaborative way. As Guéric has said, there's opportunities there. Institutional investors do want to invest in the future technologies, in infrastructure, in the green transition. Corporates, whilst they're short-term focus is on technology, it's on managing costs etc., if we look at three years, they're still wanting to accelerate their sustainability journey.
Where we really see a potential for greater collaboration is around that green energy infrastructure and it's about managing the impacts of climate change on the natural environment and on the environment in which companies operate.
Are corporates happy with the level of engagement they have with governments around the sustainability agenda and around sustainability policies? 50% say they have excellent engagement, 45% say moderate engagement, only 5% say they're dissatisfied. If we look at institutional investors, 35% say that they're happy with the level of engagement. 57 say that it's moderate. Only 7% say that they're unhappy.
But there does seem to be an opportunity to unlock faster growth if there's focus on policies that will accelerate companies’ ability to operate in that environment and institutional investor’s ability to invest in projects that are going to give them the adequate returns that they want.
What's really interesting from the survey results and this is something that we probably wouldn't have expected two or three years ago, is that companies in the Americas and in particular in the US, are very satisfied with the direction that's going. I think that this reflects the impacts of the Inflation Reduction Act and how quickly that's been stood up and how quickly companies not only in the US, but globally can tap into that source of support.
We're not necessarily seeing that in Europe. So, it shows that there's an opportunity there for that to be accelerated. But it does look as though it really focuses in around that area of the infrastructure to accelerate the transition is where there's greatest crossover and greatest potential for faster acceleration in the future.
Borsay
That's interesting, what you had to say about Joe Biden's Inflation Reduction Act, offering incentives to global businesses to operate out of America, using tax breaks, as you say. Guéric, just bearing in mind what Barry’s had to say there about the green agenda, how do you envisage better collaboration to accelerate public and private sector investments and transformation?
Jacquet
May I focus on the infrastructure investment challenge.
Borsay
Sure.
Jacquet
The challenge today is the same in all governments. We have 100% global debt and sometimes more of that, especially in the US or in Japan or in the European Union, there is no public money to be spent in the public infrastructure. And the question today is, how to support private and public private partnerships in order to increase as a private partner of the infrastructure investment.
And we think that there will be 3 possibilities, 3 levers in order to support this initiative. The first one is about the financing levers. So, imagine the new economic model in order to support the public private partnership and increase the part of the private capital allocation in infrastructure.
The second one is about the funding levers. So, imagine how to have more user-based revenues, based on infrastructure. And the third one is about the risk management covers, I mean, increase guarantees, the simplification initiatives, reduction of delays in order to allow the companies to have higher return of investment, and at least in a short term.
Borsay
That's interesting. So, we've heard about the three different levers there. I wonder if we can paint the picture of successful collaboration, different benchmarks, different examples if you can. Barry, let's start with you.
Perkins
We've seen as we said, we mentioned the Inflation Reduction Act, but we look at what corporates have done. So, there's a large European automotive manufacturer. It was looking to decide on where to invest in its next battery factory. It was probably going to go to Spain, then Central and Eastern Europe and then think about North America. With the Inflation Reduction it actually changed its priorities and it's planning to build a plant in Canada.
It shows how policies and how governments creating the environment for investment really can move the dial. We're moving into a different financial environment. Government spending is very constrained. Not every country in the world has the ability of the U.S. to really spend as much in terms of support. So, it has to be very targeted on the industries that can make the most difference in the areas that are probably fastest to achieve, but it has to be aligned to that holistic transition journey that each country sees for itself, but also within the regions that they operate.
Borsay
Guéric, I wonder if you have an example of successful collaboration?
Jacquet
Yes, of course, but I want to start with a bad example of collaboration.
Borsay
Fair enough.
Jacquet
This is about the solar panels. Unfortunately, the European industry in solar panel is not so much competitive compared to China. 20% more expensive to buy a European panel one year ago. And today the solar panel plants in Europe are closing their doors. What could we do?
We could have tax incentive or new tax on Chinese business. But today with low speed of reactivity. If we compare with good examples, we could identify the research and development policy of the European Union in the past three years, especially in health, industry and tech industry. The growth and domestic expenditure of research and development is around 2% in Europe.
The small companies that startup in Europe are currently very fast growing companies, and we are quite confident that this research and development policy is a good support to our companies. And even if we don't have the giants of the US or in China, we could have good assets in order to support major ecosystem in the future growth of business.
Borsay
All right. Well, on the subject of policy and you may have really touched on this already, Gueric, with the incentives that you outlined within Europe for health and technology businesses. But I wonder what you're hearing about how governments are considering developing industrial sovereignty to increase national resilience and unlock economic growth, further economic growth?
Jacquet
There is 2 pillars of industrial sovereignty policies. The first one is about create an economic environment, which is a good support for the companies in order to invest in the industry. So, I mean attractiveness policies. It's based on simplification and reduce the delays. So, it's possible to do something in reducing bureaucracy complexity.
The second pillar is about the economic competitiveness, and this is a tricky problem, a tricky challenge for all the European governments. And today we see that a lot of customers are not ready to accept more than 15, 20% higher prices for national production. So, the massive production, especially in the consumer goods industry, will continue to come from East Asia and the key question for us is, is it possible to focus our efforts on part of the sector, part of the strategic products and invest massively with a new tax incentive and perhaps on the reduction of the cost of work. And if we do that on strategic products, it's possible perhaps to win this battle, but it would be not possible to win this battle for all the industrial products for European countries.
Borsay
Barry, let's come to you and look at the European Union in particular and how the region’s reconsidering its approach to industrial sovereignty.
Perkins
It's really interesting. If you review Enrico Letta’s assessment of the single market, it shows that there is a tension there. The EU has historically developed around the idea of trying to ensure maximum competition, trying to ensure that level playing field. But it wasn't just in Europe. They were trying to do this globally and they found that they can't compete necessarily with the economic power and with the state support in China or with, in technology, the massive companies and platforms out of the US.
And to a certain extent this focus on maximizing competition by putting in place certain restrictions may have held back the development of certain industries in Europe. And there's an understanding now that it may be that Europe will need to build up those champions through allowing through certain deals or certain combinations, whether it be through joint ventures in the energy sector or in the automotive sector or elsewhere in industrials.
This then creates that tension again between how Europe treats its own companies and how it treats companies that are looking to access the European market. It does seem that they are evolving towards a more hard-headed and pragmatic approach to this. So, we may see Europe allowing certain deals and combinations through allowing more collaboration than we have seen in the past. And it should hopefully improve that competitive potential of Europe.
Borsay
Let's get some final thoughts then, Barry from you first of all, as to how you see future policy evolving to enable better collaboration and transformation. What are we talking about here?
Perkins
It has to be done through dialogue. As we said earlier, the survey shows that there is significant dialogue between corporates, investors and governments. It is that dialogue that needs to continue. Governments are the ones that can set policy. Investors are the ones that can provide the capital. But at the end of the day, it's corporates that are on the ground creating the jobs, boosting productivity, boosting competitiveness that are the ones that are going to be able to enact this. So, as long as we continue to see that dialogue between the three parties, then it should open up further potential going forward.
Borsay
And Guéric, some final thoughts from you on how you see future policy evolving for better collaboration and transformation?
Jacquet
So, I think new public policies on that field could leverage three pillars.
The first one is the trust. We need to trust the private sector, giving it stability in terms of regulation, in order to be sure that they could invest and develop their perspectives in the long-term period, and not only for one or two years on a political cycle.
The second one is the reform investment. There is a reform momentum today on the labor market, on tax possibilities, on sector industries.
And the third one is about investment perspective. If the government wants to have some money to invest in infrastructure and support public private investment, they need to have public spend reduction programs.
Borsay
And with those final thoughts, that's it for this episode. Thank you both so much for such a fascinating and enjoyable conversation. Barry, thank you to you.
Perkins
Thank you.
Borsay
And Guéric, thank you to you.
Jacquet
Thank you, Kait.
Borsay
Well do join us again soon when we'll continue to look at how governments can transform to strengthen services for their citizens. And please subscribe to this series so you won't miss an epis
From me, Kait Borsay, thanks for listening and bye for now.
Teaser
Government Insights, back soon.
End of podcast.
Presenters
Kait Borsay
Journalist, author, TV presenter, Radio moderator at Times Radio
Guéric Jacquet
Partner at EY-Parthenon, Public Sector Ernst & Young Advisory France
