Lopez Holdings

 

Remarks of Federico R. Lopez, chairman and CEO, at the First Philippine Holdings Corporation Annual Stockholders' Meeting on May 21, 2021
Held via https://conveneagm.com/ph/fphc

 Good morning.

While we’ll remember 2020 as a bizarre and tumultuous year because of COVID-19 and the underlying global crisis it represents, at the FPH Group, it was the period that we crystallized our definitive roles in the transition to a decarbonized and regenerative future. Our updated Mission statement is a short yet powerful phrase that’s now at the center of everything we do. It’s founded on principles that have been guiding our actions in the past and is now shaping the way we reimagine and redesign our businesses for the future.

Central to our new Mission is the Stakeholder Pentad Framework (The Responsible Business, Carol Sanford). This powerful lens captures a lot of our essence and how we want to move forward. Applying this mindset means all decisions should revolve around balancing the needs of all five stakeholders, in a
specific sequence: first, your customers; then your co-creators which are your employees, suppliers, contractors; then the Earth; then the communities; and finally, your investors. The pentad necessitates that we think in systemic wholes and not in fragmented parts. Reversing the sequence, which unfortunately has permeated the thinking of most businesses in the past, just doesn’t work when your primary goal of maximizing shareholder value leaves little room to benefit anything else.

We’ve breached most of our planet’s safe environment limits in the mindless pursuit of growth and prosperity for just a few. This has set us on a trajectory of 3-4 degrees Celsius of warming by 2100 --- that will clearly be an unlivable planet. In January 2021, results of the UNDP-Oxford University “Peoples’ Climate Vote”-- the biggest global survey on climate change among a million people across 50 countries -- showed that 64 percent of the participants believe that climate change is an emergency that requires urgent responses from countries (It’s interesting to note that almost half of the poll participants were between 14 to 18 years old). I can’t even begin to imagine the changes that are about to take place in consumer buying habits, supply chains, the rewiring of finance, and even social norms---just to name a few, as these beliefs progress and mature. Every single industry today will be affected by the need to reduce carbon dioxide emissions. Taking the necessary actions that prepare ourselves and the country for these massive shifts in how the world works will be worthwhile investments with immeasurable returns. Best to do them early and avoid getting locked into stranded assets.

The next ten years are absolutely critical to whether we get the transition on course for Carbon Neutrality by 2050 or watch it run away from us irreversibly. The signs and the frequency of 1-in-100-year events and temperature records everywhere (including the Arctic and Antarctic last year) are already demonstrating, in no uncertain terms, that time’s up and we’ve messed around with the stability of the planet to geologic-scale proportions! This is the incisive and foreboding truth behind the saying, “We’re the first generation to feel the effects of climate change and the last that can do anything about it”.

As this reality mainstreams, the world will also recognize that we have a remaining Carbon Budget that halts warming to less than 1.5 degrees Celsius. That number is in the realm of 500 or so gigatons left before we blow past that point of no return. Since global emissions are 51 gigatons per year, we have less than ten years before we use that up. We need to get this number down to zero before 2050. Not just by 20 percent or 30 percent but down to ZERO, otherwise the Earth’s warming just continues with all the terrible consequences. The COVID lockdowns have only brought down global emissions by 7-8 percent. So we need COVID-scale emission reductions every year till 2050 if we are to achieve that. That is the magnitude of the task. This is bigger than anything man has ever done in the history of this planet. The world either fragments and quarrels for their fair share of what’s left (which will surely be catastrophic) or we take the high road as a global community, prioritize, constrain what we do, and make the hard choices of where that remaining emissions budget gets used.

As the world comes to grips with this reality, we will see paradigms shifting drastically. We will go back to basics. Consumerism will hopefully be anchored less on our wants and more toward our needs. Hopefully, we focus on prosperity for all, especially those left behind, rather than on simply aiming to raise gross domestic product (GDP) growth per se. Then very importantly, we begin to reimagine and redesign our infrastructure and way of life for a changed world: decarbonized, resilient, and socially inclusive.

Why should we care about decarbonizing when the Philippines is just a tiny fraction (barely 0.4 percent) of global emissions? Shouldn’t the large, developed nations just be tasked with correcting all these as their debt to society and we, the developing world, should be given the chance to grow as they have in the past? In fact, don’t they owe us this debt after using up the planet’s carbon limits all these decades and centuries for their own material ends?

There’s truth to all that but it’s also good to keep the issue in the right perspective. The Philippines, despite its tiny contribution to world emissions, is one of the most vulnerable nations on earth to the unfolding climate crisis. We have an inordinate stake in limiting global temperature rise to within 1.5°C. Our voice in the community of nations resonates with a stronger moral power if we’re willing to back our words with action, proving it can be done.

The thought of lowering the carbon emissions of our electricity grid enthralls me because if done successfully, you can electrify transportation and buildings, and even the industrial sector, which is regarded as the most difficult to electrify because it features processes that rely heavily on the petroleum sector for both feedstocks and for energy. This will bring down carbon emissions even more and also lead to cleaner urban air. And while all these may appear to be a daunting challenge we must face, I am optimistic about the future as many new developments continue to unfold.

First, the costs of renewable energy (RE) and battery storage have come down considerably in the last decade or so. At Energy Development Corporation (EDC), we are also working on bringing down the cost of geothermal power although, admittedly, not yet quite as dramatically as what we’ve seen for wind and solar. As RE and battery storage costs drop further in the coming years, their penetration into our grids, rooftops, and our lives will increase. However, if we want to encourage a deeper penetration and deep decarbonization, we must effectively plan for the intermittency issues that arise with RE.

Second, there are a host of solutions to the issues that intermittency and seasonality bring to a grid that would maximize the penetration of renewable energy in the transition. The power industry has to use a full arsenal of technological solutions to manage the variability and intermittency inherent in RE, make energy consumption more efficient, and thus facilitate the rapid lowering of carbon footprints.

Third, there is a fundamental shift to lower carbon sources of energy. The world of energy and electricity markets is being massively disrupted. In countries like Australia, Germany, and some US states like California with even modest renewable energy penetration, the preference of the consumers and policymakers for low-carbon sources has manifested in coal plants being utilized less or being idled. The world is seeing the acceleration of this shift as it discovers that massive grid flexibility is needed for the inevitable penetration of RE sources that’s growing at a rapid pace. Global banks, huge pension funds, sovereign wealth funds, private equity, and insurance firms are now being clear about their waning appetite for investments in high-carbon fuels and technologies. Even engineering firms, technical advisers, and equipment manufacturers have announced staying away from building high-carbon emitting assets.

Our own transition to a decarbonized future will be anchored in the next few years by our efforts to bring in liquefied natural gas (LNG) through First Gen before the end of Malampaya. Bear in mind though that while we are embarking on this timely shift to LNG, we are, at the same time, also planning for its eventual phaseout in ways that complement a pathway to Carbon Neutrality by 2050 and consistent with a 1.5 degrees Celsius target.

Beyond the energy sector, we can unlock more opportunities as we reimagine how and where we get our food, our building materials (even integrating carbon negative materials like bamboo), the design of our buildings, how we cool them, how we insulate them, district cooling, what refrigerants we use, how we dispose of those refrigerants, smart buildings, and other similar innovative solutions.

Beyond designing for a decarbonized world, just as important would be planning for resilience amidst a harsher climate. Here we could reimagine how we design our cities with resilient infrastructure like underground powerlines and distributed generation as well as circularity in the use of water, rainwater, and waste (a valuable resource we’re literally throwing away).

But it’ll also be about building cities that encourage social integration, community, and compassion. The so-called 15-minute cities being planned for by progressive urban designers/mayors in Paris, Barcelona, London, Detroit, Melbourne, and Portland, Oregon where work, shopping, health, and culture are not more than a 15-minute walk, bike ride, or mass transit ride away. They are characterized by having a more thoroughly integrated urban fabric that builds social cohesion among income classes and races.

These ideas merely scratch the surface but preparing for that world now, with innovative business models that work, will ensure that we’re equipped to thrive as individuals, companies, communities, and as a nation in the coming decade. Carbon Neutrality 2050 could become that focal point which catalyzes multi-dimensional solutions from all sectors and corners of society.

I hope that you all share my excitement and optimism as we move along our journey to a decarbonized and regenerative future. Thank you for your unwavering support.

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Lopez Holdings Corporation 
16/F North Tower, Rockwell Business Center Sheridan, Sheridan St. corner United St., 1550 Bgy. Highway Hills, Mandaluyong City, Philippines

  • Trunkline: (632) 8878 0000
  • Fax: (632) 8878 0000 ext 2009