Speaker 1 [00:00:00] Hi. It’s John here. Speaker 2 [00:00:02] And it’s Theresa. Speaker 1 [00:00:03] Theresa? When I think back, way back to my childhood, there’s a saying I seem to remember hearing a lot, which was waste not want not. In fact, it seemed to be a daily message at the dinner table that scraps of food could be much better used elsewhere in the world if we kids didn’t appreciate them. Speaker 2 [00:00:22] Yeah. And I mean, the numbers are shocking, John. According to the Boston Consulting Group, about one third of the world’s food is lost or wasted every year. And the UN’s Food and Agriculture Organization estimates everything that’s lost or wasted is enough to feed one and a quarter billion hungry people each year. But before we go any further, it’s worth clarifying some terms. Food loss is something that happens at harvest or soon. After all, food waste happens after the food reaches retailers or consumers. And so if we eliminated both food loss and waste, so many hungry people would be fed, which is especially important given how many people are facing food insecurity. Speaker 1 [00:01:00] Plus, there’s a huge opportunity to reduce greenhouse gas emissions if we can reduce these totals because food loss and waste create 12 megatons of emissions every year across Canada, landfills are literally filling up with food. Metro Vancouver, to take just one example, estimates that up to 30% of the garbage sent to landfills is organic waste. Speaker 2 [00:01:21] Canada is among the worst countries on the planet when it comes to food waste. Not so fun. Fact Did you know that the average Canadian household throws out a staggering 79 kilograms per year? That’s compared to 59 kilos in the U.S., according to the UN’s Food Waste Index Report. But businesses have a part to play to. More than a quarter of all food waste comes from restaurants, while 13% comes from retailers. Speaker 1 [00:01:46] It’s a massive issue throughout the food system, but there are some elegant solutions emerging from the farmer’s field to the grocery store to our plates. And each of these solutions has the potential to reduce loss and waste and reduce harmful greenhouse gas emissions throughout the system. And that’s what’s on our table today. This is Disruptors, an RBC podcast. I’m John Stackhouse. Speaker 2 [00:02:17] And I am friend Theresa Do. Welcome to the final installment in a special three part series that we’re calling The Growing Challenge. And it we’re exploring how Canada can lead the world in clean, green agriculture using cutting edge technology, data systems and smart thinking to increase yields while reducing our environmental impact. Last week we talked about some of the technological solutions aimed at reducing emissions on Canada’s beef and dairy farms. But the issue of food waste and food loss is arguably an even bigger challenge to be solved. After all, the less we waste, the more resources we save, the fewer emissions we put into our atmosphere and the better able we are to feed a growing planet. In the first episode of this series, we introduced you to Sonja, who she’s a managing partner at Boston Consulting Group, who is investigating this vital question How can Canada produce more food while slashing GHG emissions in the process? As Sonja explains, the twin issues of food waste and food loss have to be central to that discussion. Food waste is something that actually happens all across the value chain, from everywhere, from production, all the way to the food that we waste at home. And that makes up about 10% or so of the agricultural emissions. Speaker 1 [00:03:36] That’s a significant number. But I also wanted to know how much food, waste and loss happens at each stage of the value chain, from producer to retailer to consumer. Speaker 2 [00:03:45] A good chunk of that comes from the on farm production. So what happens is farmers will actually grow food that is just not for whatever reason harvested or if it’s harvested, it may just not be brought to market. Then that happens for many reasons, including labor challenges. There may be fluctuations and variability in prices in the market, or there just may not be a market for the farmers to sell into. So it’s actually more cost effective for them to just leave the food there and there aren’t any penalties for doing so in terms of processing and manufacturing. Now mostly we’re pretty efficient at food processing, but there are byproducts of processing. So as we make food, things that come off that could potentially be leveraged because there’s still sort of food stock, but they may not be today. So that’s another source of waste. And then really the big chunk of waste. So, you know, close to 40% or so will be from sort of what we think of as restaurants, grocery stores, and then ultimately consumers at home. And that’s everything ranging from, you know, if you just think about the food that you’re leaving on your plate when you go out or when you’re at an event and there’s the buffet that set up, you know, not all of that food gets eaten. It gets thrown out to the food that just goes bad in our refrigerators because we bought too much or we didn’t get around to eating it. John This gets back to that saying you mentioned off the top waste not want not all that food we buy at the grocery store or in a restaurant that never gets eaten. And that 40% number that Sonia mentioned, it’s seared into the minds of many of those who work with food day in and day out. Like our next guest. Hi, Meeru Dalwala. I’m the co-owner and chef of Veggies Restaurant here in Vancouver as well. I am the founder of my Banbury Organic Baby Foods Meeru, along with her ex-husband Vikram, which runs one of Canada’s most acclaimed Indian restaurants. Mira is a child of immigrants, and her upbringing has shaped her entire attitude towards food waste. So Mom and Dad grew up in refugee camps in Old Delhi because of the war of partition, and so it was a little bit more direct for me growing up. We weren’t allowed to waste food. We could we could do a lot of other things. I remember I shoplifted once at the age of ten and I got in trouble for shoplifting. It was candy bars because we weren’t allowed to eat candy bars, but I got in less trouble for shoplifting. Then I would get in trouble for not finishing my dinner. This is super relatable as a child of refugees myself, not wanting to waste food is related to living with a scarcity mindset. You don’t waste food because you can’t afford to, and if you do, it means you’re depriving your family or your future self of nutrition, which risks your ability to survive another day. So I can very much understand why Mira takes the issue of food waste so seriously, as do many of the people she works with. We had a restaurant in Seattle called Shana Restaurant from December 2012, all the way through to 2015. And half of my kitchen staff I hired, they were refugees from Ethiopia and Eritrea, and the other half were new immigrants from India, all women on opening night. From my point of view, it was a fantastic evening. And then at around 12:30 a.m. I found my Ethiopian and Eritrean staff by the Compost and they were pulling out all this meat, all this meat going to the trash. And I said, It’s the compost. And they said, No, compost is trash. I don’t see any goats eating this right. We don’t see any cows eating this. They were tearfully indignant. Then I looked in it to. Well, there’s a lot of lamb popsicles in there. It was uneaten. I can’t even just jump in here. LAMB Popsicles are one of Mira and breadcrumbs, signature dishes, fresh cut racks of lamb with vinaigrette, cream sauce. That sounds so good. Honestly, finding those in a compost bean would seem like some kind of environmental food crime. And that’s when I looked at that and I thought, how must this look to people coming from? And we all know about the history of famine in Ethiopia and Eritrea. And I that’s when I thought, oh, this is just I’m so embarrassed at all levels. But at that point, I was more morally embarrassed for is now it’s not just about pointing your finger now. It’s just a logical climate change issue as well. Speaker 1 [00:08:09] That’s a profound story, Teresa. And being confronted with our own waste by people who have seen famine up close. It’s a real wake up call. Speaker 2 [00:08:17] Very true. So Muro says that she is very committed to reducing food waste and also to solving foods, climate challenges in terms of emissions. She thinks that part of the problem lies in the fact that consumers have trouble connecting the dots between food waste and climate change. It’s an out of sight, out of mind situation. Maybe it’s because we don’t see the visual of it getting wasted. Maybe because right now we’re not feeling the impact of food waste in terms of climate change. Maybe we just need it, for lack of a better phrase, thrown in our face. The obviousness of we’re thinking about how do we cut down our carbon footprint? But maybe food is so cheap that we’re not thinking about the fact that when you buy that steak or you’re buying that chicken in the store, a lot of fossil fuels have already gone into putting it there in the supermarket. The plastic wrap on the chicken is there, the raising of the chicken, the fertilizer, the feed, the pollution going into the river, transporting it. Then we’re purchasing that chicken. It sits in our full fridge and then we realize, Oh, the best before date was two days ago. Then we’re worried about getting food sick and then we actually toss the chicken. Speaker 1 [00:09:31] So maybe there are some ways to address that in the grocery store. Things like labeling the detail, the carbon footprint of that package of chicken breasts to use mirrors. Example, if you gave an indication of how far that chicken has traveled from farmer to grocer, it might help build awareness right at the point of sale. But how does that awareness then translate into the restaurant environment? How do you reduce waste there when the order of the day is giving customers what they want? Here’s Meru again. Speaker 2 [00:09:59] We restauranteurs. The smaller we are, the more efficient we tend to be with our money is tighter, right? The smaller you are, the less staff you have, the tighter you have to be. We’re pretty consistent at veggies, so that really helps the restaurant. When you are consistent, when you know, okay, we’re going to do approximately within $500 or within $1,000. We’re going to do this much business on a particular night. It’s a lot easier for us at the restaurant. We can choose what we want to purchase and get deliveries and things done. So on the back side of the kitchen, we have minimal, minimal food waste at the restaurants. Our food waste comes from the customer point of view. Now, that’s a hard one because in the past 15 years, maybe even 20 years, the U.S. and Canada, we’re competing with these big corporations, with all you can eat for 699. And people are expecting this bang for their buck when they go to the restaurant. And especially for us during tourist season in the summertime, there is this preconceived notion that Indian food is like an all you can eat buffet. That really resonates with me, John. Every time I travel, especially to the U.S., but really all across North America, I can’t help but notice how big portions have become. Speaker 1 [00:11:14] For some reason, many consumers have come to value quantity over quality. When it comes to dining out, it’s something Miro thinks about a lot. Speaker 2 [00:11:22] I have been working a lot in the past couple of years of trying to figure out how do I do it? That the customer is paying what the customer should pay for the food. But the food isn’t cheap enough subliminally to that customer that they have no problem leaving an entire lamb popsicle on their plate or asking for more naan and more rice and then just leaving that rice and not on the plate. We actually look at our compost every single night to determine, just to have a look at it and just say, okay, this is what customers today wasted. Speaker 1 [00:11:54] Have you tried scolding your customers the way your parents did? Speaker 2 [00:11:57] Well, Vikram is pretty good at that. Finish your plate. But customers don’t mind being teased about, you know, what they’re wearing. But morally, it’s hard to tease the customer. Speaker 1 [00:12:07] So instead of teasing or scolding customers, Mira and Vikram try to educate them about food waste for some of their charity fundraising dinners, for example. Mira uses ingredients from a nonprofit in Vancouver, the Food Starch Foundation. It collects so-called rescue food from local grocery stores and. Speaker 2 [00:12:23] At the very end when I announced that you just ate a meal prepared from rescued food and even rescued food. I don’t like that word because it has like some charitable component to it. You get very high quality food that grocery stores deemed not worthy to sell anymore because of this best before date or because it didn’t look the way a consumer wants it to look. And thankfully, I got it. I was able to host a fundraiser. You were able to experience what this food is. I mean, it’s great to see the look on their faces. Speaker 1 [00:12:59] I’ll bet they’re a little surprised, but also impressed. Emmy RU hopes it causes people to really think about their habits. Speaker 2 [00:13:05] We need to change our eating when we go to restaurants and we need to change our purchasing. When we go to the grocery stores, we need to become a little bit smarter and wiser about how we purchase food and our fears of getting sick. As Mira says, we need to change how we eat and go to restaurants, and we need to change how we shop when we go to grocery stores. But of course, there’s another critical player in this revolution, and that’s the producer who supplies those restaurants and stocks, those store shelves. Speaker 3 [00:13:35] I’m Randy Huffman and the chief food safety and sustainability officer at Maple Leaf Foods. Speaker 1 [00:13:40] Maple Leaf Foods is one of Canada’s largest and oldest food producers. Dating way back to 1927 and as a food producer. Maple Leaf knows full well that its activities have a significant carbon footprint. But Randy Huffman told us that Maple Leaf is also aiming to become, quote, the most sustainable protein company on earth. And a key ingredient in that plan is cutting its own food waste in half. Speaker 3 [00:14:03] Back in about 20 1415, we began to set long term environmental footprint goals focused on how our operations impact our utility usage, such as natural gas, electricity and water. But we also recognized the importance of food loss back in 2014, and we set a goal to reduce our impact, to reduce the amount of food loss and waste from our manufacturing system by 50% by 2025. That was a goal, we said, based on a baseline in 2016. Since 2016, we’ve accomplished a 36% reduction in food loss and waste in our system. So we’re on track to meet our target of a 50% reduction by 2025. We’ve got work to do, but we feel confident we’ll hit that. Speaker 1 [00:14:49] Of course, targets are great, but implementing those changes on a tight timeline is another matter. I asked Randy how he’s planning to achieve this audacious net zero goal, and specifically what role food waste plays in the effort. Speaker 3 [00:15:03] The products that we produce have a very defined shelf life, and depending on the category, it can be from, you know, a week or two of salable shelf life to several months. But in all cases there’s an end to the life of that product. So probably the most meaningful approaches that we can take to ensure that the product maintains its quality and maintains its quality characteristics and consumer acceptability throughout the shelf life have to do with improving our hygienic conditions in our facilities. So improving the microbiological status of foods that we produce. And we’ve made dramatic strides in that. Second, we packaging the technologies and the ways that we packaged foods today compared to five, ten, 20 years ago, is is dramatically improved. And so packaging can play a role in improving the quality of the product through the consumer’s use of that product. Speaker 2 [00:15:59] Essentially, he’s saying that quality foods, cleaner facilities and better packaging make food last longer. That all checks out because the longer food lasts, the less likely it is to get thrown out. But there must be some waste that occurs in other areas of Maple Leafs production process, right? Speaker 1 [00:16:15] There is. That’s why it’s often called shrinkage in the retail world. When something falls off a conveyor belt and onto the floor, for instance, it gets deemed unfit for human consumption. It has to be thrown out. But as Randy says, through regular food and waste audits at its plants, Maple Leaf has been able to tighten its production processes and reduce some of that shrinkage. Speaker 3 [00:16:35] Those audits continue every year, and they identify best practices or engineering changes that we can make to our equipment that reduce the amount of loss that occurs in the system that Maple Leaf Foods were big believers in. You manage what you measure. That that concept and principle helps us strive for improvements. One example that comes to mind is very simple mechanical approaches to preventing product from falling off of a conveyor. Let’s say once we started measuring this, it became more important to our teams. And then we began to address, well, how can we create that guarding on that conveyor to be more effective and not have that inch gap where food can fall through? Speaker 2 [00:17:21] One thing I thought was interesting in our conversation with Randy was how he highlighted generational changes in the reasons why food gets wasted. He says, For one thing, we’re much more conscientious these days about spoilage. Speaker 3 [00:17:33] In the past, food spoilage was a much larger contributor to waste, and my parents grew up in the Depression era. My dad on a dairy farm. And now when it comes to assessing whether or not deli meat is safe to consume, my mom, she would say, never eat slippery me how we think about freshness and shelf life and quality of food products today. I know many consumers are driven by what’s on the label, the use by date. In fact, our food systems have become so efficient at producing food that it has a long shelf life and it has technology over the course of history. Recent history has led to dramatic improvements in the life of the foods that we consume. Yet we still have a major problem. Speaker 1 [00:18:17] It’s an interesting observation, Teresa. In the past, food got wasted due to things like poor refrigeration or production processes. But back then, consumers valued food, especially during economic crises like the Great Depression, when there was so much scarcity. Canadians waste more than 50 million tons of food. Every year. This suggests that the source of the problem lies at least partly in the attitudes of consumers. Speaker 3 [00:18:40] I think prior generations, our parents generations were much more cognizant of the value of food and were less tolerant of approach we have today where, you know, there’s just not as much appreciation for the value of food and what goes into getting it to a consumer’s home. I think back in those days, people were much more aware of that and reducing food loss in the home. Speaker 2 [00:19:03] It’s true, although I do have to wonder about the impact inflation is having. Food may be relatively cheap compared to historical highs, but it’s getting more expensive by the day. Data released by Statistics Canada this fall suggests the price of food purchased from stores is now rising at its fastest pace since 1981, up more than 11% year over year. You have to think that maybe those increases will force consumers to be smarter about what they buy and don’t buy. And to that point, John, who better to ask than somebody from Canada’s top grocery chain? Stick around for that conversation and more right after this short break. You’re listening to Disruptors an RBC podcast. I’m Theresa Do. I’d like to share with you our latest Proof Point report from RBC Economics and thought leadership that dives into Canada’s provincial finances. All provinces from coast to coast have recently recorded surprisingly high revenues, thanks in part to elevated commodity prices and soaring inflation. But how long will this revenue windfall last? We predict that the looming economic downturn and higher interest rates will soon tip the scale for provincial governments. To learn more, visit RBC E-commerce Thought Leadership. Welcome back to the third and final episode in our special series on the future of Canadian Agriculture, The Growing Challenge. Today, we’re looking at the issue of food waste from several different perspectives, from the role played by consumers to producers to restaurateurs and retailers. We just heard from Randy Huffman of Maple Leaf Foods, who told us about how Canada’s leading food producer is reducing waste and loss throughout its production system, thanks to data driven decision making and cutting edge technology. But remember that stat Sonja, who from BCG shared with us that 40% of waste comes from a further down the food chain from restaurants, grocery stores and ultimately consumers at home. While this means that grocery stores in particular have a vital role to play in helping to move the needle. Speaker 3 [00:21:12] My name is Kevin Groh. I head up an area called Corporate Affairs for Loblaw Companies Ltd.. And Corporate Affairs is really the company’s relationship and communication with stakeholders right across the spectrum. So from the people we work with, to the folks in our stores, to suppliers, governments, communities, and that’s an increasingly tightly connected activity to the things we’re doing around the environment, fighting climate change and also priorities around advancing social equity. Speaker 1 [00:21:43] Kevin says grocery stores are in a unique position to gauge changing consumer choices about climate change and sustainability. Everything from how we shop, whether it’s in-store or online to what we buy organic vegan, gluten free meat or dairy to how those items are sourced are all part of the food shopping equation. As the Loblaw Group of companies moves to become a net zero operation. Kevin says they’re looking at the many ways they can reduce waste in stores and throughout the supply chain. Speaker 3 [00:22:12] As we look at our company purpose. We talk about helping Canadians live life well. And it’s really evident how you might do that if you’re Loblaw and you operate the largest chain of both corporately owned and independent grocery stores across Canada and also the Shoppers Drug Mart chain. So we came up with five crisp commitments. One is to fight climate change and the other is to advance social equity. And beneath those are really specific goals and activities around. On the climate side, bringing our carbon footprint to zero, getting to net zero greenhouse gas emissions position and then food waste are. Our goal is really simple, which is we want to send zero food waste to landfill by 2030 and all of those things we believe link back to helping Canadians live life well. The interesting thing is many of them intersect. So if you look at carbon, for instance, we want to have a net zero carbon footprint within. That is certainly going to be consideration of food waste and the negative impact that food waste going to landfill has on the environment. Similarly, on some of the commitments we’ve made around social interests, namely the health and wellness of families, there is a very direct connection between food waste and that category of social equity, which is think it’s morally offensive that businesses or people are throwing out food that can be otherwise consumed, particularly when we have levels of food insecurity like we do in Canada. Speaker 2 [00:23:41] That last point. Food insecurity is a really important one, John. When we talked with Sonja from BCG, she told us a shocking fact. Nearly 16% of households in Canada were food insecure in 2021. That means that nearly one in six Canadians doesn’t have access to enough safe and nutritious food to meet their daily needs. And the soaring cost of food isn’t helping. But Kevin says a food waste for grocers is also a sign of a business that’s not running particularly well. Speaker 3 [00:24:12] I guess if you look at food waste, fundamentally, you could almost say that that the existence of food waste is a business failure for a grocer. So if you talk to ten grocers about the idea of food waste, most of them will start with the statement, something like, you know, we’re in the business of selling food, not throwing it out. Many years ago, we met internally and actually met with others in the industry to wrestle the challenge of food waste and the fact that, you know, it’s not only morally objectionable, but from a business perspective, the less food waste we create, the better our business is running. And in those conversations, we took a baseline of our food waste from 2016 and said that we would cut it in half by 2025. And we came out of the gates really, really strong. And within a matter of a couple of years, I think we had cut our food waste by about 75% in our corporate stores. Those are the ones we effectively own and operate that aren’t independently run. And it was a really great achievement. And it it sort of gave us the ambition of saying, you know what, we’re going to up the goal and we’re going to say by 2030, we will be sending no food waste to landfill. Speaker 1 [00:25:19] And that’s where innovation comes into play. Loblaw has partnered with a wide variety of startups delivering tech solutions. To the food waste challenge and to research. There are innovations that provide benefits to the environment and substantial savings to consumers. Speaker 3 [00:25:33] One of the innovations we’ve been looking at and have actually tested with great success is Flash Foods, and that’s an app based program that actually gives people access to food in our store at discounts as great as 50%. And the selection of those items really has to do with an algorithm that assesses whether we have ordered too much of something and the likelihood that that product will sell by its best before date. And as items sort of approach their best before date, but are still very safe and healthy to eat, they’re made available at deep discounts. And we found that it’s an interesting microcosm of the bigger challenge, which is we don’t want to create food waste. Ideally, the things on our shelves we’d like to sell and not throw away. And people are very inspired by discounts. Speaker 2 [00:26:22] I get that. I mean, who doesn’t appreciate a good deal? Right. Speaker 3 [00:26:26] And I think when you look at the issues behind food waste, whether it’s the negative business implication of throwing out food or the negative social implication of throwing out food, flush foods has been a bit of a sweet spot solution that checks a lot of those boxes. Speaker 1 [00:26:42] Flashfood was introduced in more than 500 Loblaw stores, resulting in the elimination of more than 5 million kilos of potential food waste in 2020. So some pretty significant savings there, but the benefits are also being seen up and down Loblaws supply chain. Speaker 2 [00:26:58] Kevin told us the company is working with growers to help market imperfect produce to consumers. You’ll remember hearing about that concept of rescued food from Marion’s Alala so it’s a similar idea at Loblaw. The company is taking fruits and veggies that might not fetch a full price and giving them a new lease on life. Speaker 3 [00:27:16] We’ve actually packaged it up to say, Yeah, this potato looks a little strange, but it’s perfectly edible and healthy and we’ve packaged that under the no name naturally imperfect line. So there’s a there’s an effort there to just think slightly differently, both at the at the brand level, but also at the consumer level to capture what otherwise might become waste or in another part of the country. We’ve been partnering with a group called Loop Resources to literally collect our food waste and take it and turn it into animal feed for local farms. So there are there are ways to address the challenge and where food waste is inevitable, we’re working to make sure that it’s not inevitably the landfill. The other areas that we’ve worked on include Zoo Share, which is a partnership with the Toronto Zoo to take our food waste and their anim on manure, combine it into a biogas that is renewable energy fed directly into the grid. Speaker 1 [00:28:11] Theresa We’re hearing this again and again about biogas and the opportunities throughout the food system to turn waste into energy. Speaker 2 [00:28:19] It really gets back to that idea of a circular economy, John, where surplus food or waste from farms, grocers and wholesalers is finding new purpose while helping to reduce harmful emissions. And that commitment to a circular economy is something that consumers can also tackle in their own homes. You don’t have to wait for your favorite retailer or restaurant to take that action, as our next guest proves. Speaker 3 [00:28:41] Hi, I’m Jeremy Lang. I’m the founder of Pila and we are working on creating a waste free future. So we do it by creating everyday products or everyday waste, and our goal is to eliminate £10 billion of waste. And we started with plastic waste and now we’re working on food waste to help keep food waste out of the landfill and get it back to the soil where it belongs. Speaker 2 [00:29:00] Sheila produces a smart countertop, composter called Lomi. It holds about four liters of waste and takes between three and 15 hours to break it down, depending on the type of material that’s compared to the weeks or months it takes. Conventional composter. Jeremy says the need for his product was obvious because our landfills just aren’t meant to handle the millions of tons of organic waste they get every year. Speaker 3 [00:29:23] When plants and animals die, they’re supposed to go back to the earth. When we send them to a landfill, they biodegrade anaerobic with no air and they create methane, which is way worse than CO2. Food waste rotting in landfill creates roughly seven or 8% of all greenhouse gas emissions. So it’s a big problem to solve. So anything that we can do to help nature get that food waste, keep it out of the landfill and put it back into the soil so it helps to create healthy topsoil, which helps to grow healthy plants. And it’s like nature’s fertilizer, the end product. You can sprinkle in your garden and you can sprinkle on your lawn. You can avoid the compost facility altogether and go directly into the soil. We’re saving emissions by preventing that greenhouse gas emission, by preventing and are avoiding the landfill, avoiding that food waste from rotting landfill, and by creating healthy topsoil, which helps to sequester carbon from the atmosphere. Speaker 1 [00:30:14] It sounds like a great consumer oriented innovation. Theresa And according to Jeremy, more than 100,000 households are now using Lumi to reduce their food waste. Speaker 2 [00:30:23] That’s quite impressive. John, I can’t believe we’ve reached the end of this series. We’ve covered so much ground, and yet there’s still so much more to say. When I think about that big number that more than a third of the world’s food is lost or wasted every year, it really strikes a chord with me. Reducing waste seems like low hanging fruit, to use another food pun in our battle to get more food into the hands of those who need it and to keep our greenhouse gas emissions in check. Speaker 1 [00:30:54] But before we wrap up, Teresa, I’d love to hear your thoughts on everything we’ve learned in the series. Speaker 2 [00:30:58] There’s a lot to digest here, John, but what stands out to me the most is how incredibly high tech agriculture is, which of course, is evidence everybody working in the space and not that much to those outside of it, like I was until I started doing research on it. And we were only able to touch a little bit on this in a previous episode. But the future of food is unreal. Lab grown meats, cheeses, even chocolate one day could be available at a restaurant or bodega near you. Not to mention the vertical farms that are already offering fresher local microgreens at the grocery store. It makes me feel like we can really transform how we produce and consume food to be way more climate conscious and meaningfully reduce our emissions. What about you? Speaker 1 [00:31:43] I keep thinking about change, and if we’re going to tackle climate change, we all have to think about how to change the way we produce food, the way we transport food, the way we consume food, and how we can better preserve food. Fortunately, there are technologies emerging in all sorts of fascinating ways. I think about how the past decade of innovation or a couple of decades really has been rooted in software and how much innovation in the decade ahead is going to be based on hardware, especially in the ag and food sector, where we’re going to need new machines, tools, devices to transform and change all that we do with food. And that’s what Canadians for generations have been great at. So for Canada, it’s game on. Speaker 2 [00:32:28] And just to cap off with the focus of today’s episode, I think about food waste or rather not wasting food a lot in my daily life. It’s fascinating to me that food waste is both one of the easiest aspects of emissions to address because it’s directly under our control and also one of the hardest, because it’s about changing our behavior and our attitudes, which are very sticky. Speaker 1 [00:32:49] Absolutely. We love on this podcast to talk about technology, but technology doesn’t matter if we don’t think a lot harder about all of our own behaviors. Speaker 2 [00:32:58] So we’d like to offer a huge thanks to all our guests for sharing their insights with us. We hope you’ve enjoyed listening to the series as much as we’ve enjoyed putting it together. And if you’d like to revisit some of our past episodes or you just want to keep the conversation going, visit RBC dot com slash thought leadership. Until next time. I’m Theresa Do. Speaker 1 [00:33:18] And I’m John Stackhouse. This is Disruptors, an RBC podcast. Talk to you soon. Speaker 2 [00:33:27] Disruptors, an RBC podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. It’s produced and recorded by Jar Audio. For more disruptors content, like or subscribe wherever you get your podcasts and visit rbc dot com, slash disruptors.

Speaker 1 [00:00:01] Hi, it’s John here. Happy New Year and welcome back. We’ve been warned for years that the point of no return is coming. Sea levels are rising. The Earth is warming. We’ve seen thawing permafrost and large scale die offs in coral reefs. And even parts of the Amazon are experiencing increased episodes of drought. Okay. That’s a lot of despair. But guess what? There’s also hope. We know the problem. And more than ever, we know a lot of the solutions. Critical policies are actually in place and a very key element. Money is on the table to fund innovative technologies that can change our world. The US is making its largest investment ever. The European Commission has pledged to mobilize at least €1,000,000,000,000 in sustainable investments over the next ten years, and Canada is ponying up, signaling the next federal budget, along with commitments from key provinces, could set the course of public spending on climate for years to come. But it’s not enough. Now it’s time for the private sector to put those billions of dollars to work and add many billions more. The future is here. The question is how can we disrupt it before it disrupts us? This is Disruptors. An RBC podcast. I’m John Stackhouse. Today, I’ll be speaking with two people who decide how billions of dollars are invested in green tech. I’ll be joined by Elliot haTO, a managing director at Beyond Net Zero, a global growth equity firm with $73 billion under management. But first, I’d like to introduce Dr. Andrew Steer. Andrew is the president and CEO of the Bezos Earth Fund, created by Jeff Bezos in 2020. It has $10 billion that has to be disbursed as grants to address climate and nature within the current decade. Andrew, welcome to Disruptors. Speaker 2 [00:02:07] Thank you very much, John. Speaker 1 [00:02:08] I want to start with the Bezos Earth Fund. What is it? And maybe give us a sense of the vision behind it? Speaker 2 [00:02:14] Well, Jeff Bezos allocated $10 billion to be spent down this decisive decade on the challenges of climate change and nature. And so it’s an exciting venture. It sounds like a lot of money and it is a lot of money. But actually, compared to the need, of course, it needs to be leveraged so that we can get real change because this is the decade that will determine whether or not we succeed or fail. Speaker 1 [00:02:43] So is it that critical that those sorts of investments, that scale of investment be made this decade? Because if it’s made a decade hence, it’s too late? Speaker 2 [00:02:53] Well, next decade will also be critical. The problem is, if we don’t do it right this decade, it will be impossible to do next decade. So that’s why this decade is is really absolutely critical. We we simply have to get down to net zero. When we talk about climate change and we simply must reduce the incredible loss of nature which is going on at the moment because these two problems multiply themselves and we’re heading to a bad place. We live in this highly paradoxical world, don’t we? We have never had the progress. You know, the average person today lives 20 years longer than when I was born. Poverty has fallen from 80% of the world’s population to less than 10% of the world’s population. Amazing achievements. But the price we’ve paid has simply been too high in terms of losing species, losing natural habitats, polluting the atmosphere. And we can do better. Speaker 1 [00:03:56] And Jeff Bezos, I mean, he’s celebrated widely for a level of thinking and ambition that is all too rare in this world. Can you give us a bit more sense of how that ambition applies to climate work? Speaker 2 [00:04:08] Well, I mean, it is wonderful, isn’t it, that wealthy people decide to give back. And it’s wonderful how a growing number of high net worth individuals are seeing these big problems that are needing to be addressed. And Jeff Bezos himself obviously has a way of thinking. I mean, he is somebody who has taken on problems that at times seem impossible and systematically gone about addressing them so that we now have the ability to do things that we couldn’t do before, having really transformed entire industries. And so bringing that mindset to these incredibly, you could say, wicked problems, solving climate change is the greatest collective action problem, as many have said sort of in the history of the world. It’s got everything that makes it difficult. It’s got into temporal inequities, it’s got current inequities, it’s got deep moral issues, it’s got massive technological issues, it’s got complex financial issues, and it’s got huge political questions that need to be resolved and all of that kind of free rider problems that we know about. And so, my goodness me, we need the best brains as well as the best money to address these issues. Speaker 1 [00:05:27] But I guess in some ways you’re not solving that problem. Jeff isn’t solving that problem. You’re trying to find support, invest in the many folks out there who are developing the ideas and solutions. And I’m curious what kind of mindset you strive to bring to that. You know, I’ve heard the fund described as one that supports ideas and not just projects. That’s got an appeal. Not always easy to invest in ideas on, unfortunately, but it probably takes a different approach than building a company or running a project. Can you give us a bit of insight into what kind of thinking you and your team tries to bring to the challenge? Speaker 2 [00:06:03] Well, we try to identify and monitor the roughly 50 to 70 major transitions that are required this decade and next. You know, the big blocks of we’ve got to totally transform energy. We’ve got to rethink our food system. We’ve got to think about forests. We’ve got to think about our cities. Within each of those, there are five or six transitions, which in and of themselves are pretty major. We’ve got to get. Rid of the internal combustion engine. We’ve got to shift diets towards more plant based. We’ve got to do about 50 things of that level. And what we do is we co-manage with the World Resources Institute and some others something we call the System Change Lab. And what we do with those, we monitor those 50 to 70. And we ask the question, how close are they to tipping points beyond which change becomes irresistible and unstoppable? And what are the barriers to get there? Our job is to be pretty forensic about where we go in using both money and convening power and influence Power. It could be to finance primary research. It could be to finance political advocacy. It depends on the issue, and it depends upon precisely where they are in that trajectory towards a positive tipping point. So when you mentioned we like to address ideas, this is again, is something that Jeff Bezos, you know, will say let’s not allocate funds in our efforts to issues or even to targets. Let’s allocate them to ideas that will get to those targets, that will address those issues. Speaker 1 [00:07:46] And the ethos of the fund, primarily one of technology. That technology can and will solve this. Or do you believe that we also need culture change, behavior change, even social change, and not rely on those magic bullets of technology? Speaker 2 [00:08:02] We absolutely and utterly require cutting edge technology and behavioral change. And indeed, as we move forward towards the end of the 2020s into the 2030s, behavioral change is going to become more important is probable that people in Canada and certainly in the United Kingdom, where I come from originally, we have reduced our greenhouse gases quite a lot. The average citizen has no idea it’s happened because they haven’t had to change their behavior. As we move forward, we are actually going to have to change our behavior. Now, technology is still incredibly important and we couldn’t have a chance of addressing climate change. You know, if you look at the cost of, say, solar energy, I mean, since Jimmy Carter put solar panels on the roof of the White House in 1979, the price of solar has fallen by 99.6%. So there’s actually been a wonderful revolution that’s intellectual and economic. I mean, even ten years ago, the entire economics profession felt that, my goodness me, it would be nice to do something about climate change, but we’re going to have to pay a cost in terms of lost competitiveness, lost economic growth. And now because of cost changes, because of technology changes, because we’ve learned about what policies work. It now turns out that actually smart, strong climate action leads to more economic efficiency. It drives new technologies, it opens new opportunities, it shifts expectations. So there is a much better future. So you get more competitiveness and you can get more growth. Now, we don’t want to be Panglossian about this. It’s not all win win. There are losers. And that’s where politics comes in. Speaker 1 [00:10:00] Well, exactly. This is political and I mean that in a positive way because it’s about collective decision making, which is reflected in in our politics when we do it well. But we don’t do politics very well in many countries. How are you thinking about systems change in the political arena or the collective decision making arena that can perhaps accelerate some of the other investments that you’re making? Speaker 2 [00:10:25] Well, I mean, this is a very difficult issue. We’ve certainly put quite a bit of resources already into communications. Last year, we invested quite a bit here in the United States trying to clarify the narrative about good climate action leads to a good, better economy. And we we invested in targeted messaging through various media, television, social media, basically bringing data, bringing the data and evidence and bringing human stories as to what works. I think generally the environmental movement has been trumped by more sophisticated communications and political skills from the opposition. Speaker 1 [00:11:16] I want to shift to the idea of of of leverage. People will hear that you are investing $1,000,000,000 a year and think that’s a large amount of money. And of course it’s a huge amount of money. But the need out there for the transition is going to be kind of in the 5 to $10 trillion a year range globally. That’s how much capital needs to be invested. So we all need to be thinking more about leverage. And I’m curious what you’re seeing and learning about leverage in your own climate work. Speaker 2 [00:11:45] Well, most philanthropy has been unleveraged, so a dollar into good health gives a dollar of good output. In good health. You know, you build a hospital, you build a school, you build whatever. Unfortunately, because the problems are so great, we need to do better than that. Now, you can leverage in several ways. You can leverage through de-risking private investment. And obviously the Royal Bank of Canada has done incredible work on that. Many investments in sustainable development need some de-risking. One could do that very directly, but one also can, if you like, do the policy side, which is also leverage. I mean, in many ways that’s the most effective leverage of all if one invests in reshaping policy. So what we try and do for every single investment we ask, well, if you like the direct impact and then what’s the second order impact that would encourage others to do it? And another I mean, another form of leverage is simply doing something that is so successful that then through the right kind of communication, it can then become irresistible. So we’re experimenting with all kinds of ways of doing it. So as an example, last year we really wanted to take on the most difficult issue of protection or conservation that exists, which is the Congo Basin, which is, you know, unbelievably precious. It absorbs more carbon than the Amazon Basin and the Southeast Asia tropical forests combined, and yet it’s under massive threat. And obviously there are all kinds of governance issues. So we gave funding to about ten different world class organizations and we said, look, the deal is each of you are very, very good at certain things. Your job is to work on those and be accountable to to us for what you do. But in addition to that, for the first time ever, let’s work as a team together. So if you’ve got the CEOs of ten internationally recognized organizations together with ourselves, then suddenly you get some European governments that say, actually, we’d be like to be part of this. And then you can go and see any head of state in the Congo basin that you want and you start sort of thinking differently about, my goodness me, if we only we could get the the head of the office, the head of the country all the way down and have something joined up, my word, that could be real leverage. Speaker 1 [00:14:20] But that spirit of collaboration is really at the heart of leverage. Leverage isn’t just a financial equation. It’s about bringing together different forces and empowering them, but also using them together to do things that none could do on their own. And it makes me think of the Electric School Bus initiative, which I wanted to ask you about, because that’s a it’s a really neat and ambitious project aimed at decarbonizing the entire U.S. school bus fleet. Curious how you see it as a template for more collaboration, especially between public and philanthropic forces? Speaker 2 [00:14:51] You’re absolutely right what you just said, John. I think I mean, if you look at almost any of the problems that we’re trying to deal with, there’s no one organization. There’s not even one group of organizations. It’s basically a sort of multi-stakeholder solution. And you need governments and you need, you know, NGOs, you need citizen group, corporate sector and so on. And actually the school bus situation in the United States, a very good example of that. There are 480,000 school busses in the United States. If you are a poor child from a poor county going to school in a bus in this country, because remember, schooling is a county level responsibility, you breathe air from diesel fumes. That is basically like being on the street in New Delhi. I mean, it’s really bad for health. So this has a social justice element to it, a health element. And this is one of the very first conversations that I have had with Jeff Bezos and Lauren Sanchez about when I was in my old job. And it was like, wouldn’t it be exciting if we could do something that would have a health benefit? But not only that, it would have a climate benefit, it would have an intergenerational benefit. It would it would actually also help create an industry in this country, because 96% of all the electric busses in the world were built in China. And then on top of that, by the way, during those long, hot summer months while school busses just sit there, they actually don’t sit there if they’re electric because they become a giant battery. And because 480,000 batteries, when you take electricity off the grid, when it’s cheap and plentiful, you put it back on the grid when it’s not, my goodness me, that saves dozens of power plants being built. But you can only then do it if the state level gets engaged, the school districts get engaged, the industrial and financial sector gets engaged. And so what we did, we worked on legislation and now there are, what, $12 billion that’s been put into this, something like that through the new Biden administration. And little by little, you start seeing, my goodness me, we could put this jigsaw puzzle together. Not us. I mean, you said earlier we don’t take any particular credit for this, although I think we’ve played a very good role. We’re part of, if you like, making sure that the pieces of the jigsaw puzzle sort of come together at the right time in the right kind of way. Speaker 1 [00:17:24] This point about multiple benefits from multiple our allies is really critical and often lost on climate policy, where many people, for understandable reasons, see the objective as critical enough on its own to be the only ROI, if you will. That’s important, but that’s not necessarily the case for all sorts of people in society who have multiple needs. And the more that policies and investments can help address those multiple needs rather than be a kind of a single solution oriented one, probably the better we all are. And I’ve been seeing more of this in the biodiversity space, and I raise that because our last episode of 2022 was on biodiversity, and you and I met for the first time at the Montreal Biodiversity Conference and it was there that I got to more deeply appreciate the intersection of climate change and biodiversity and how they both lead to benefits in each realm and are interconnected in all sorts of ways. And I’m curious, Andrew, how you see those two challenges intersecting and how we can do more. Speaker 2 [00:18:28] Well, you’re absolutely right. And by the way, your podcast edition on that was wonderful. I think that conference in Montreal was extremely important and I think combining that with COP26 in Glasgow, which for the first time sort of recognized we can’t solve climate change unless you also protect nature because it’s there’s more than one third of the solution. And the same goes the other way round. You can’t protect nature unless we address climate change, because with the way that climate change is going, we are losing nature at an even more rapid rate. And it’s really been wonderful to see just in the last 18 months culminating in in Montreal, we’ve seen this sort of willingness to think of these two as integrated. And your points about, you know, multiple benefits are incredibly important. You know, they call them co-benefits. And in many parts of the world, you know, if we want to deal with climate change, you know, don’t enter the policy door through the climate change door, enter it through health or entry through nature. Speaker 1 [00:19:32] We’re sort of time, unfortunately. But I also was just reflecting we’re still in the early days of January, and therefore I want to seize on the New Year spirit to ask you, as you look through 2023, what your maybe greatest hope is for the year and also what your greatest fear is. Speaker 2 [00:19:50] Well, look, this is a year where things are going to need to start improving. We got data just today on greenhouse gas emissions in the United States. Greenhouse gas emissions went up last year and things need to change. I am deeply hopeful that actions that may take a year or two to have bite, they are going to start having impact this year. I think some of the decisions made in Glasgow and in Sharm el Sheikh will start to bear fruit in the United States. Obviously with the additional funds that are being put forward. I mean, historically important. We are going to start seeing some progress. But look, we are in a hugely uphill battle. We’re in this paradoxical world where, if you ask two experts say on climate change, you say, how are we doing? And one will say, it’s amazing. You know, costs have come down 99%. We’re doing this. It’s really great. Others who say, you know, we’re a bunch of lemmings going off a cliff the end times and which how could they both be, right? Well, they actually are both right. They are both right. We are doing better and better than we are dog chasing a bus and the dog is going faster and faster. And we are saying we are running so fast is great, but the bus is accelerating away and so the dog can’t keep running faster. The dog has to get its own electric bike. You know, we need a new instrument. And I’ve got a feeling that we’re getting towards the stage where. Will accept that fact. Speaker 1 [00:21:17] What do you think those dogs need to do in 2023, above all else? Speaker 2 [00:21:21] We need once and for all to recognize that no individual government or even government can solve the problem. We need to sit down around the table and we need to get the real decision makers to say, okay, if the issue is electrification of transportation, what do we need to do? How do we how do we have a rational conversation? It can’t simply be preaching. It’s got to be a multi-stakeholder approach. And I hope and pray that we’re heading towards that kind of new it’s really a new governance system. And I think there are signs of hope. But, you know, there’s still a far, far more risks than most people are aware of. Speaker 1 [00:22:08] In a site governance system going to have to come from government or from collectives of government like the U.N., or is it going to come from philanthropists, private actors, business and other coalitions? Speaker 2 [00:22:20] I think it’s already starting to change. I mean, it is quite interesting that if you go to the United Nations General Assembly now, you’ll see a much, much richer approach. You’ll see young people. You see businesspeople. Governments have to accept it. But often governments, you know, don’t always lead. They are responsive. And so the business community, I mean, it’s albeit difficult, it is stunning when you think about it that now $130 trillion of assets under management are now committed to net zero. That would have been unthinkable. Now it’s very, very difficult to implement it. And there’s some rocky things going through right now, but we now need to come through that and say, look, you know, we know it’s difficult, but now let’s really redouble our efforts. And I’ve got a feeling that that’s happening. And, you know, I don’t want to flatter your country, but I do think actually some pretty exciting things going on in Canada right now. Speaker 1 [00:23:20] What excites you most in terms of what’s happening in Canada? Speaker 2 [00:23:22] Well, I think, for example, on the nature side, the announcement that Canada made on massive new protected areas, I think anywhere in history on the first day of the COP and led by First nations, very, very exciting. I mean, talk about multi-stakeholder. I mean, so interesting seeing First Nations seizing and being given authority to manage natural resources, which they are very good at, at managing. That would be just one example. Speaker 1 [00:23:58] It’s those coalitions likely and unlikely that are keeping us moving forward as bumpy as rocky as that road can be. And I’m grateful that the Bezos Earth Fund is leading a lot of those coalitions. Andrew, And that you’re you’re a champion of so many. Thank you so much for being on disruptors. Speaker 2 [00:24:15] Thank you, John. We love listening to your podcasts. Speaker 1 [00:24:19] That was Dr. Andrew Steer, president and CEO of the $10 Billion Bezos Earth Fund. Up next, Ellia haTO will join us to talk about how massive investments in technology are changing the fight against climate change. Speaker 3 [00:24:37] RBC Tech for Nature. Is there a $100 million by 2025 multi-year commitment to accelerate tech based solutions that help preserve the world’s greatest wealth, our natural ecosystem? We work with partners to leverage technology and innovation capabilities to help solve pressing environmental challenges. This program is a key element of how we are delivering on our climate strategy. The RBC Climate Blueprint RBC Tech for Nature is now accepting funding applications until February six. Apply now to partner with us and create a more sustainable future. Visit RBC dot com slash tech furniture for more information. Speaker 1 [00:25:12] Welcome back. Today, we’re talking about how Canada can emulate the most comprehensive climate law in American history, the Inflation Reduction Act, or IRA. Our next guest is Eli Aheto. He’s the managing director of Beyond Net Zero, a global growth equity firm that invests in companies to develop innovative climate solutions. Eli, welcome to Disruptors. Speaker 4 [00:25:34] John Thank you so much for having me. It’s a pleasure to be with you. Speaker 1 [00:25:37] I want to start with Beyond Net Zero, and if you could give our listeners some background on what it is and what it’s all about. Speaker 4 [00:25:44] Sure. Beyond Net Zero is the climate investing team at General Atlantic. I think folks may recognize General Atlantic as a 40 year old global growth equity firm. We’ve been investing in leading businesses in digital sectors for most of our history. And the climate initiative is one that’s fairly new in the last two years. But we recognize it as one of the most consequential opportunities in business today and also one of the most consequential opportunities in society. And so we think that there is a significant need for capital to help drive the growth of businesses that are putting out products and services that help people decarbonize either their operations, their livelihoods. You know, all sorts of activities that need to have reduced greenhouse gas emissions. And so we’re pretty excited about the opportunity ahead of us both, because there’s a real social dimension to what we need to accomplish. But we think it’s a fantastic business opportunity where there are entrepreneurs creating products and services that are saving customers money, which is really exciting, at the same time helping them reduce their greenhouse gas emissions. Speaker 1 [00:26:48] I want to get into some of those examples and opportunities, but wonder first if we can talk a bit about the macro environment. Of course, the Inflation Reduction Act or IRA, is clearly injecting a lot of capital into American opportunities. But at the same time, we’ve got a lot of challenges and headwinds in in markets generally. How are you looking at the macro environment for investing in 2023? Speaker 4 [00:27:14] You know, it continues to be a challenging market as an investor. Obviously, we’ve had markets falling over the last year. In some sectors we still have high valuations, which those two things don’t seem to go together. In the climate sector particularly, we’ve still seen high valuations that haven’t yet reflected where the public markets are. But at the same time, we’re seeing markets that are growing quite dramatically. So if you think about, for example, EV charging infrastructure, that’s a market that Bloomberg thinks will grow 80% year over year, and that’s despite the macro environment. More broadly. If you think about solar, the IEA has just increased its estimate of solar buildout for the next several years by 20% globally. That’s a pretty big step up in one year. Part of that is an adjustment that is a consequence of the IRA. Part of that is an adjustment that’s a consequence of energy security in Europe. And part of that’s a consequence of the decreased cost of renewable power. And so there are a lot of tailwinds that are driving forward the climate opportunity, despite what is still a volatile and in some ways rough macroeconomic environment. Speaker 1 [00:28:22] Well, it has been a pretty rough year that maybe now in the rearview mirror a bit longer than that than a year. And for some that brings back memories of earlier clean tech wrote Wonder in your mind what makes this time different? Speaker 4 [00:28:36] I think there are numerous differences between clean tech 1.0 and where we are today. We have now ecosystems of entrepreneurs, financiers, scientists, academics, policymakers who have experience in climate. We didn’t have that last time around. We have now technologies that very importantly are mature and are cost effective. We have now entrepreneurs focused on business models where they are delivering a cost savings to consumers. We have now financial markets that are ready, willing and able to finance businesses that have demonstrated they can be profitable at scale. And we have obviously a desire for consumers to decarbonize and mandate from corporates to decarbonize their supply chains. We have a political support that we didn’t have in the first clean tech investing boom. And so it’s a it’s a radically different environment. Speaker 1 [00:29:34] Did IRA change your fundamental outlook? Did you wake up in August, September, whenever it hit the headlines and think, Wow, I’ve got to rethink my portfolio and my allocations? Or is it more kind of a marginal benefit than that? Speaker 4 [00:29:47] There’s no describing the IRA as being marginal. It clearly was an overdue substantial statement around what the U.S. was going to commit to relative to climate change, and it created the incentives in several different sectors, some of which were already active. And so I mentioned distributed generation. You know, we’ve been very keenly looking at transportation, electrification. So it will create great tailwinds for those sectors. But those sectors were already moving forward. I think in things like hydrogen and carbon capture, it has changed the game. So anywhere from a 60 to 70% reduction in the levelized cost or the, you know, the cost for those technologies. And so you’re seeing right away companies announcing large scale manufacturing facilities, new hydrogen facilities. You’re seeing people announce new battery facilities, you’re seeing folks announce new lithium mining operations. And so I think the IRA has very successfully catalyzed those harder to abate longer duration and somewhat less mature technologies to make them economic and help them scale. The IRA was a game changer in a lot of ways. Now for our portfolio, I don’t think it changed what we’re doing. Mostly we are focused on mature technologies, businesses that are scaling, and so these were businesses that were successful pre IRA, but there definitively is a wind at their back with the IRA. Speaker 1 [00:31:16] But as you look at options, as all investors are doing and will continue to do, what do you see as the needs for Canada to become a greater pull for investors like you? Speaker 4 [00:31:28] The key for us is is business models with scale. And so obviously relative to the US, Canada has a smaller population and a smaller economy by the numbers, but it’s still a very large country and the very clear regulatory frameworks and there are a fairly sizable and very attractive sort of income levels in Canada. So we would expect that those things will yield. Businesses that are serving customers decarbonize in attractive way. You could see easily businesses that are focused on electrification of automobiles being relevant in Canada. You could see easily businesses that are financing consumers to decarbonize, being relevant in Canada. And so I don’t I don’t think that there is any business that exists in the US that couldn’t exist in Canada. It’s just a question for us to go out and find those entrepreneurs and figure out how to convince them to partner with us. Speaker 1 [00:32:20] And that’s a great message for entrepreneurs who may be listening that the world of capital is watching and ready to move and move very quickly in in this environment. Ali, as we move towards close, I wonder if you can give us a perspective on General Atlantic for our listeners who may not be familiar with it. It is one of the great names in investing and has been for decades. What excites you most About 2023? Speaker 4 [00:32:46] I wouldn’t have guessed that we would have the tailwinds we have today. It’s the IRA is a big tailwind. Unfortunately, energy security as a as a concept is a big tailwind. The cost of these technologies keeps coming down. And every day I meet an entrepreneur who is, I think, cracking the code around how to bring decarbonization to markets in a way that’s attractive for the customer and for the investor. It is a sea change from what climate 1.0 was. But when you see that it’s possible to both bring your customer value, your investor value and society value, that that I think is a really attractive proposition. Speaker 1 [00:33:29] That’s a great message to wrap up with Ali and a great message to begin the year with that there’s a lot of people out there cracking the code. Thank you for being on disruptors. Speaker 4 [00:33:39] It was my great pleasure. Thank you so much for having us. Speaker 1 [00:33:42] That was Eli Aheto, managing director at Beyond Net Zero. And before that, Dr. Andrew Steer, president and CEO of the Bezos Earth Fund. We’re at a critical juncture as a country with so much money being put into the advancement of renewable energy and electric vehicles, Canada is bound to feel the effects. It’s up to all of us not to sit back and watch from the sidelines, but rather take bold action, show courage and in the global race to net zero, even take the lead, it’s Canada’s opportunity. Join us next time for a special live on location episode from Davos, Switzerland. I’ll be there along with business and political leaders from across the globe for the World Economic Forum. And you can bet the climate crisis will be one of the hot topics. Until then. I’m John Stackhouse and this is Disruptors, an RBC podcast. Talk to you soon. Speaker 3 [00:34:39] Disruptors, an RBC podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. It’s produced and recorded by JAR Audio. For more disruptors content, like or subscribe wherever you get your podcasts and visit our RBC.com slash disruptors.

Speaker 1 [00:00:01] Hi. Is John here. You may feel like 2023 is about to be a really complex year. No one seems to have a clear handle on inflation or the war in Ukraine or whether Donald Trump is going to make a comeback. And then there’s climate change. Demographic clifts and COVID variance kind of makes my head hurt. I didn’t even bother with New Year’s predictions this year as I just couldn’t think through the complexities that we seem to be drowning in. I suspect complexity is a word you’ll hear a lot in 2023, but don’t let it intimidate you. Even the world’s best computers are having trouble figuring out those complex problems. Winning Jeopardy may be easy. You just need to know every bit of information ever created, which, for a good supercomputer, is like a chip shot. But predicting the future requires a whole different level of thinking and computing. One could say it’s a quantum difference. That’s another word you may hear a lot this year. Quantum. Speaker 2 [00:01:00] Hi, my name is Stephanie Simmons and I’m the founder and Chief Quantum officer of Photonic Inc., as well as the advisory council co-chair of the newly-announced national quantum strategy for Canada. Quantum is a coming technological tidal wave, and we already have specific concrete examples of how it’s going to change the way we communicate and compute. Ultimately, information. The bits we use are physical objects that are manipulated according to physical laws. The information possessed by quantum systems is simply exponentially larger in scale than the non quantum bits we use today. Once we harness fault tolerant quantum technologies, which is to say trustworthy quantum technologies, we will be able to do certain things that are otherwise physically impossible to accomplish by any other means. Speaker 1 [00:01:43] India, Israel, Japan, Australia. They all have quantum strategies. And here in Canada the Federal Government is trying to help up our quantum game. It recently announced a national quantum strategy with $360 million behind it. So what is this quantum thing? And cannot live up to the hype in time to address the world’s most pressing issues, whether it’s climate change or international conflict or cybersecurity? This is Disruptors and RBC podcast. I’m John Stackhouse. Today, I’m excited to speak with an innovator on the front lines of the quantum computing revolution. Kristen Weed Brook is the CEO of Toronto based Xanadu Quantum Technologies. Just last year, Xanadu became one of the first companies in the world to successfully demonstrate quantum computation advantage. We’re going to hear a lot more about that in a minute. Christian, welcome to Disruptors. Speaker 3 [00:02:50] Thank you, John. It’s nice to be here. Speaker 1 [00:02:52] Before we get into some of the heavy stuff on Quantum, I love to know a bit more about your own background and journey, Christian and also the origins of Xanadu. But maybe we can start with the name of the company. What inspired it? Speaker 3 [00:03:06] It actually comes from the song Xanadu by Olivia Newton-John and written by ELO. Actually one of the funny sort of side note. So that is the actual movie itself was a bit of a box office bomb. And we’ve raised probably ten times the amount of money that made at the box office. Speaker 1 [00:03:22] Well, it’s a great tribute to the late Olivia Newton-John, fellow Australian. Tell us how you came from Australia to Canada and how the company got going. Speaker 3 [00:03:32] Like a lot of people at Xanadu and other quantum companies, I came from academia. So from Australia I did undergrad and University of Queensland in Brisbane and I did a master’s in Nash and Young Australian National University in Canberra and then started to finish my PhD back at University of Queensland as well. There I was working on quantum computing and quantum security as it relates to photonics or light, which is what Xanadu, it’s, it’s medium that it’s stores and processes information. After that, I was a post-doc at MIT. He continued in the same sort of research and then found a job at University of Toronto. As soon as I landed. I just thought, This is a wonderful place to be and live and work and been here ever since and became a Canadian a couple of years ago as well. Speaker 1 [00:05:28] Before we get deeper into this, I want to pause you there and help a lot of our listeners catch up to you on Quantum. So I’ll ask the killer Jeopardy question. What is quantum? Speaker 3 [00:05:38] Basically, we have computers now. We have security solutions on the Internet and so forth. They actually run according to the principles of classical physics or Newtonian physics. Or another way of looking at it is non quantum physics. And these are things that we’re very used to in our real world. If we throw to our Frisbee, for instance, we throw away and it doesn’t do anything weird, you know, even if there’s wind or throw it off, but it doesn’t suddenly go the opposite direction, for instance. Now, if you’re able to zoom into any object and you see it’s made of atoms and protons and electrons and so forth, if you threw a Frisbee near an atom and you you’re part of the around the atom, it will have different laws of physics that operate. And these are called quantum physics. So quantum really means quantum physics or laws of physics at the atomic level. And so if you can actually harness these properties at the atomic level or if you’re looking at photons as we are, then you can actually generate some very weird things. And there’s certain properties that we don’t see in our classical world like entanglement and superposition interference and so forth that actually operate. So long story short, there’s different properties of physics that happen on the atomic level that we can actually leverage to do some really cool things. And in computation, if we can leverage these quantum properties, we can see for certain problems dramatic speed up in how long it takes to run a computation in security. We can actually create secure methods of transmitting information that are not possible using classical physics. So it’s a game changer, though. The catch here is that these physical properties of the quantum atomic level a very hard to leverage. And the reason is that our world interacts with this atomic world and you lose entangled. When you lose a ship for position and you lose interference and so forth. So they’re very hard to extract. And that’s why it’s very difficult to build a quantum computer. Is these properties or these weight effects that we want to leverage. They’re very ephemeral and they’re very hard to actually loft out. Speaker 1 [00:07:45] Let’s talk for a minute about your computer. It’s called Borealis, which is a and it’s a photonic quantum computer. Last year, it reached what’s called computational Advantage, which made it solved a complex mathematical operation in a fraction of a second. I believe it’s something that would take the world’s most powerful supercomputer more than 9000 years, which is almost unfathomable. Tell us a bit more about Borealis. Speaker 3 [00:08:11] Yeah, it was a remarkable achievement. As you mentioned, it was a demonstration of quantum computational advantage or quantum supremacy. Sometimes they’re used interchangeably and it shows a very well-defined task that you sort of hit a classical computer and not even just desktop computers, but supercomputers and pick them up against a quantum computer, as it’s called Borealis and press go and you see how fast each of them solves. And like you said, under a second for our Borealis machine. But it would have taken 9000 years or more for a classical computer. This demonstration was the first time ever by a start up and first time in Canada. So that’s why the team is very proud about it. It’s a great achievement for Canada. And also quantum computing companies in Canada took about two years to build the hardware, and the hardware team started essentially when COVID started. So there’s all that sort of difficulty on top of it, which is a testament to a very small team as well that managed to build this. The very first demonstration was by Google, who uses superconducting qubits and think of them as electrons. So a quantum version of electronics, whereas ours is quantum photonics. They did a wonderful job. It was the first time that was demonstrated for us. We were able to do it live based approach, first time that was available on the cloud as well. And so that’s the key thing. This decade perhaps will be characterized by having these very challenging computers to build accessible over the cloud. So, yeah, it was a crazy achievement, was published and verified and sort of peer reviewed in nature as well. So the community really is excited about the achievement by the Xanadu team. Speaker 1 [00:09:48] When I first got to see Borealis, you took me on a tour last year and there was great excitement at the time because you were very close to that computational advantage. One of the things that struck me was the size of the computer. I mean, much bigger than anything I have access to, but relatively small given the enormous power of it. What all goes into the housing of these extraordinary machines that may change everything around us? Speaker 3 [00:10:12] Yeah, actually, you mentioned our building, so we’re on the 29th floor. As you know, John, you know, we were concerned before we moved in is every building swings a little bit. And would that affect our measurements? Would it affect our apparatus? And because most of the time you see photonic computers or quantum optics, as we call them experiments, they’re often in the bottom of a of a university building in the basement because you need to keep everything all the light closed off and so forth. So we were unsure about building one of these devices, but in the end, thankfully, none of the issues that we were concerned about actually played a role, which is great. And I think that speaks to the robustness of our photonic devices and chips as well. And one of the key things, you know, I mentioned this device has 216 qubits when you can start solving important customer problems. So around a million cubits physical qubits now it could be plus or minus, but that’s a good way to sort of think about it, you know, what is a magnitude away. But the key thing is some of the breakthroughs in Borealis are actually needed, and one of them is you need some sort of buffer or transmitting light through fiber optics. And when you look at a traditional data center, a data center has, you know, a certain amount of square footage and you’d have all these server racks within it, you know, one after the other, and they’re all talking to each other using light as well. But they’re computing, using electronics. So the way to scale up and it’s very reminiscent of the things we achieved in Borealis is you’re going to have many of these modules very much, say, multiple versions of Borealis, roughly speaking, but they’ll all be talking to each other using light or photons. There are theses and why we believe perhaps we have one of the edges when it comes to scaling up is the ability to actually network our devices because they are already photonic based. So what better way to sort of scale up if you have to use photonics, meaning that’s how you connect them using the fiber optics, then already a computer that’s computing using light based approach. Speaker 1 [00:12:07] This is a really exciting global race. The Chinese are very advanced in quantum computing. Google has been making great strides. Where does Xanadu stand up in the in the global rankings? Speaker 3 [00:12:19] You know, it depends on how you define this. So if you if you look at quantum supremacy or quantum computational advantage, we do have the most powerful quantum computer. Again, there’s a lot of caveats there which we try to be clear about. And, you know, one of them is for a specific type of problem. No customer use cases yet, but we’re only one of three demonstrations of quantum supremacy. The first was by Google, second by a great team in China and also now a third time by SATs. Which is the first time it’s available on the cloud for anyone with internet connection. Susanna do is in terms of that aspect is one of the leaders in the world in terms of photonics, definitely one of the leaders as well. You know, the hope is with photonics is what we’re leveraging now is we didn’t have to invent the laser, we didn’t have to invent fiber optics. We can order them from companies. And, you know, as you mentioned, I originally came from Australia. And what better country to leverage the photonics than Canadians history in photonics, industry, Nortel and others as well. So we’re able to leverage that, which is a great thing. And, you know, speaking to your point about where Canada’s can succeed, it’s also in this area as well. So I would say on those points, we’re definitely hitting above our bodyweight and also one of the leaders as well. Speaker 1 [00:13:31] Christian. I appreciate applications may also be a few years away or longer, but I wonder if you can give our listeners a sense of where you see quantum making significant differences in the economy and in society over the next number of years. Where do you think the applications will first be most impactful? Speaker 3 [00:13:51] Yeah, that’s a good question. And I would say applications are still a few years off. We’re more confident that once us or anyone else can reach millions of us, that’s where you can start solving important customer problems. The big picture is in terms of the buckets. So the main industries, the common ones that you would hear about, where a quantum computer can really outperform and really change the world in would be pharmaceuticals. So there, for instance, would be drug discovery. Another one would be finance. Common examples. There would be portfolio optimization. We hear about that. Another big one, which is where Zander’s really playing, is in material design and specifically next generation battery development. And another one that you often hear about is logistics. So let’s take Amazon for instance. They want to find an optimal path so they can save a lot of money in fuel and drivers. Time to make sure that doing the shortest path for a delivery. So these are the Commonwealth. They’re all complex systems, meaning if you add extra, extra elements to it, it doesn’t scale very well. So now I think in most industries focus is key. So each of these buckets or verticals, it could take a lifetime, each of them. So we’ve just focused on material disease, SARS and, you know, quantum chemistry, but more specifically next generation battery development. In our last round, we actually got an investment seriously from Volkswagen, and we’re actually been working with Volkswagen on projects the last year or two and will continue to do so as well. And we try to be very optimistic and say, look, this is the potential, but be realistic as well. Find that middle ground. And for us, it’s a case of investigating. If you had a million qubits and more for quantum computer, where would Volkswagen and other car companies use them to create a new battery that would be ten times faster to charge ten times longer distance on a single charge, You know, safer. All the usual metrics that traditional companies are looking at in the batteries are doing that as well. If you ran like the Borealis for 9000 years, you know, Volkswagen, other companies are not going to want to run a machine for 9000 years. So maybe even a year is a good metric, you know, So there’s a lot of different ways that it could help. But I would say these are the common industries that people talk about. Speaker 1 [00:16:03] It seems, and this will be overly simplistic, but that a lot of quantum computing opportunities are addressing future unknowns versus current computational challenges, which tend to be focused on current no ones and unknowns. Who is going into the vagaries of the future? Speaker 3 [00:16:20] There’s two things that I think about when you thinking about the hopefulness of a technology. One is that, as I mentioned, we’ve been building computers but not exploiting the full laws of the universe of nature. So we’ve done enormous historically, companies have done phenomenal work since the fifties and beyond and computer chips and architectures and up until the Internet and PC and mobile phones today. But the laws they’ve been using in order to create these things are not the most general sort of laws. So why I’m encouraged is that imagine if we can now use the most general laws of physics that we know about quantum physics. Imagine if we can leverage everything of that, that space. The hope is, is that the ability of problems we can solve also is proportional to that. The other thing, if we look back at history, I always like reading about the mid seventies and late seventies and the PC revolution with the apple, Apple one and Apple two and so forth, you would see a lot of the early advertisements were really for hobbyists, for the personal computer though I remember some of the early ads in the mid seventies were about advertising to housewives, said you can use your computer to look at a menu. And that was really the selling point, you know, apart from hobbyists and just having fun on these things and programing for, you know, abstract things. And it wasn’t till maybe 79 or so that they started come up with business applications. The spreadsheets for businesses were documents. And then we went into the eighties and more things games and so forth came more popular as well as a suite of applications. But those things, you know, maybe a few people could have imagined. And definitely science fiction writers have thought about all the possibilities going back 100 years and so forth, what the future may look like. But the actual applications were very much unknown and it was still selling. But look where we are today. Imagine if we, you know, said we can’t think of any other applications. Speaker 1 [00:18:16] Let’s take a quick break. When we come back, Christian SEABROOK, the CEO of Xanadu. We’ll talk about where Canada falls in the race for quantum computing Edge and who we’re racing against. Speaker 2 [00:18:30] You’re listening to Disruptors and RBC podcast. I’m Theresa Do. I’d like to share with you our latest agriculture report from RBC Economics on Thought leadership, called the Transformative Seven Technologies that Can Drive Canada’s Next Green Revolution. In it, we identify seven key agtech innovations we believe can both meaningfully reduce emissions and present opportunities for Canada to lead. Some, like anaerobic digester, carbon capture and precision technology, are ready to scale now. Others, like vertical farms, plant science and cellular agriculture, will be key solutions for the future. In every case, maximizing their potential will mean building the right platforms for collaboration among not just farmers and entrepreneurs, but also investors, corporates and governments. To learn more, visit RBC E-commerce Transformative seven. Speaker 1 [00:19:30] Welcome back. Today, I’m speaking with Kristen Wheat, Brooke, the CEO of Xanadu, about Canada’s place and potential in the development of quantum computing. Christian, there used to be a bit of quantum hype maybe a couple of years ago that suggested that the first team to achieve quantum supremacy would have a singular victory that only one supreme quantum computer would prevail. Has your understanding of quantum supremacy evolved over the last few years? Speaker 3 [00:20:01] Yeah. Yes, and that’s a good point. I do believe it depends on who you’re talking to in terms of the hype. I would say us and Google and a few others have always known that quantum supremacy is just a stepping stone, an initial achievement that the very difficult achievement but needs to be ticked off and then, you know, continued on. What’s the error correction and fault tolerance? The reason I say that, and I think Google has mentioned this too, when their great experiment came out, is there were a lot of naysayers that said even a quantum supremacy demonstration is not possible, meaning put aside applications for customers. Even if you’ve chosen an esoteric math problem, you still would not be able to beat a is a quantum computer. So I think those things were important. But also in our case too, and maybe with others, a lot of the technical demonstrations for Borealis are actually needed for error correction fault tolerance anyway. So it’s a rite of passage that I think was an important one for us as well. I think most people would have looked at it as a as a, you know, selling the pass through rather the be all and end all achievement. Now, though, getting back to your thought of one winner, to rule them all, even if a few companies came out tomorrow with a million qubits, which is not really possible or likely, it’s still a few years away. But let’s say that A, there’s still enough market and problems to go around, that it would be really hard to actually one company, even if it’s a Google, I’d be able to dominate every single vertical. For us to be a specific example, we’ve chosen next generation battery development to exclusion of everyone else, and that particular industry has a different supply. Chains have it has a different customer base, it has different sales and marketing. For us, we have to hire people that have background in quantum chemistry and batteries. So long story short, I think there’s more than enough for many winners. And you know, another way to perhaps look at it, maybe Xanadu dominates in Canada or North America and there’s another company that dominates in Europe as well. So a lot of different possibilities. But we all need to get to a million qubits first. Speaker 1 [00:21:58] Well, let’s turn to that point about national strategies. As I mentioned earlier, the federal government has announced $360 million to create a national quantum strategy. Why does Canada need this? Speaker 3 [00:22:10] I would say the first thing that comes to mind is building a quantum computer from the hardware point of view particularly is extremely expensive. It’s going to take a lot of money. And that money specifically was really going through the universities. And also that is a problem of the of the funnel of talent coming through and training them. The universities in Canada have been training these quantum physicists in quantum computing and so forth for the last two decades or more. And so having that pipeline come through, the companies in Canada, like Xanadu and others can actually leverage is important. Some money needs to be put there. Think of previous industries like the, you know, chip market or telecommunication market. These are very big markets. It takes billions and billions of dollars already. The other thing, if you look at competition, whether it’s friendly or not, the US has put ten times that amount of money roughly. So, you know, billion or two into the same sort of strategies. And so if we want to be competitive, it’s key for us to be able to have enough money to attract the talent as well to stop them from going to other places. China, I believe, has put in maybe 3 to 5 billion as well, something in a couple of billion or more. And Europe has done a lot as well. We’ve seen them being actively engaged. And thankfully, as you as you know, John, a week ago, the prime minister and the minister, the champagne visited us, which is great, and that was to announce Swift’s US Strategic Innovation Fund to reimbursement program of up to $40 million. And this shows you the amount of money that actually needs to go in and also the amount of jobs that it will create. And also the quantum Canadian ecosystem in general will create as well. Speaker 1 [00:23:44] Yeah, I mean, $360 million is a lot of money. I believe Canada is spending roughly on par with Israel and Russia, which are serious players in this. But India, I think, has committed $1,000,000,000 to to quantum the EU. Now, these are announcements, but it’s 7 billion and China again an announcement, 15 billion. Speaker 3 [00:24:03] Yeah. And then maybe another point, John, is Canada, Singapore and Australia. For the last two, two and a half decades, their governments have put in so much money in terms of the academic and university side where most of us have come from. And so it would be a shame for these countries and obviously Canada to not really be able to leverage as much as the talent pool and Xanadu has. I think 52% of the employees are from overseas and they want to. So far. Stay here. Speaker 1 [00:24:31] Is there a unique advantage that Canada has in that in that global competition? Speaker 3 [00:24:35] I think so. I mean, if you look at University of Toronto, you look at Institute of Quantum Computing in University World and other places in Vancouver and Montreal and so forth. We have the talent base here and that is really key. Some of the benefits for companies like the Shred program, we’ve been leveraging that from day one, which is grades two rebate on the through taxation, and it’s just helped start ups. It’s helped us to create 170 jobs now. The other big one is from our photonics based approach too. There are a lot of photonic engineers from Nortel and the history of telco companies in Canada. They’ve had a great history there and we’re hoping we can also leverage that as well. You know, if anyone’s listening that knows anyone that has a background, we are looking always for people that have the I would say not a quantum side, but they may have a, you know, optical engineering or electrical engineering. Speaker 1 [00:25:23] I love that spirit. Entrepreneurs are always recruiting. You give a very hopeful picture for Quantum. Some prefer to cast it as a kind of a black and white narrative, and that if darker forces achieve true quantum supremacy or get to that million qubits before others, they could do incredibly malicious things with technology. Do we need to be fearful of where Quantum could go as well as hopeful? Speaker 3 [00:25:49] Yeah, I believe most technologies have, as you mentioned, a darker last side. Most have that dual aspect of it. I would say it’s important to recognize that that’s the first step. So for instance, Internet security. Yeah, that’s still still far away. That’s probably the very least by the end of this decade. There’s certainly companies out there, if they’re not quantum in terms of their technology, but they’re the traditional codes that can shore up the Internet security again, you know, replace our existing codes. So there’s companies already working on one of the most drastic, nefarious aspects of quantum computing, which is Internet security. So those things are well underway and missed in the US is already working up a group of standards that people can sort of say, okay, well I can choose one of these, you know, two or three or four standards, implement them in my security device and so forth. So I think we’re in a good position at the moment because people are aware about these things that and are already working on solutions. Speaker 1 [00:26:43] Let’s end with a question of hope. When you hit that million qubit mark, what will be your greatest hope for where it goes from there? Speaker 3 [00:26:51] This sounds maybe a trial in some sense because it’s kind of obvious, but I hope if we hit a million, we’ve got over a thousand people we’ve given jobs to. You know, it’s kind of implied in all these things. But it’s amazing that we’ve already given 170 people jobs that can, you know, feed the family and provide shelter and all the basic necessities. Beyond that, it would be great if Canada can actually have a dominant company again in sort of hard tech. So we did have BlackBerry. There’s Nortel. We would like to have something of that scale one day with a different ending or maybe an ending that prolonged many, many decades. We have a goal of building a 50 year company. So that will be great. Whether of your work in Canada or where we’re helping our customers is providing useful this, you know, what are we actually doing for the world that someone is willing to hand over a dollar and receive a product or service from that. So very simple goals, but these things actually have a way of leading to the biggest accomplishments. Speaker 1 [00:27:51] Those would be great. Pardon the expression quantum leaps. Speaker 3 [00:27:53] Exactly. Speaker 1 [00:27:54] Christian, thank you so much for being a part of disruptors. Speaker 3 [00:27:57] Thank you, John. Appreciate your time. Thank you. Speaker 1 [00:28:01] That was Christian Weedbrook, CEO of Xanadu. You know, it’s fascinating to hear about a technology with such massive potential. And I think I know a fair bit more about quantum than before we started this episode, but I sure wouldn’t pick it if I ever got on Jeopardy. What I do know is Canada is globally competitive in this frontier of technology, and if we get it right, we can help disrupt positively all sorts of sectors and solve all sorts of challenges out there, whether it’s developing precision medicine or being on the right side of cybersecurity. The quantum race is just getting going and it’s going to be incredible to see where innovators like Christian and Xanadu take us in the years ahead. I’m John Stackhouse and this is Disruptors, an RBC podcast. Talk to you soon. Speaker 2 [00:28:55] Disruptors, an RBC podcast is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. It’s produced and recorded by Jar Audio. For more disruptors content, like or subscribe wherever you get your podcasts and visit RBC dot com, slash Disruptors.

Speaker 1 [00:00:03] Hey, it’s Theresa. Welcome to Disruptors. The 10 minutes where we dive into the latest innovation, tech and economic buzz. For this week’s take, we’re talking about Canada’s housing market, which is starting to cool down after a two year pandemic driven surge. The recent Canadian Real Estate Association, or CREA report showed that tides may be shifting in buyers’ favour. So what should aspiring first time homeowners like myself know if they’re looking to break into the market? And what should sellers be aware of in this changing landscape? To help us better understand how the chaos of the last two years is settling and what’s likely to come, as Robert Hogue, assistant chief economist at RBC Economics, he’s just released his latest monthly report, “Canada’s housing market taps on the brakes as interest rates rise”. Robert, Welcome to the 10 Minute-Take! Speaker 2 [00:00:56] Hello, Theresa. Speaker 1 [00:00:57] After the frenzied last couple of years, we’re seeing rising interest rates, predictably finally cooling demand for housing. And I’m seeing the phrase buyer’s market being bandied about across so many different headlines and news outlets. But you’ve been a keen observer of the housing landscape for years now. How would you actually describe what’s going on, especially compared to last year and before the pandemic? What’s the full picture here? Speaker 2 [00:01:23] Right. We’re starting from a well, from a starting point where the market was in a frenzy. I mean, the last since the summer of 2020, we’ve seen record months after record months in terms of home resale activity. So the starting point is extremely strong now. Should we be talking about a buyer’s market? I think it’s a little premature at this point. Will it become a buyer’s market? It could well be now. That being said, if the market were to become a buyer’s market, would that mean that buyers are finally like yourself? We’ll see great opportunities out there. The thing to keep in mind is that now we are, as you pointed out, at a time when interest rates are rising, mortgage rates are rising, especially that variable rates now are rising, which means from a buyer perspective, prices may kind of stabilize, maybe decline in some markets to a certain degree, but is going to get tougher because borrowing costs are moving up. Now, whether a buyer’s market will represent relief at last for a generation of buyers now, I’m not so sure. But one thing is getting clearer and clearer, though, is that those spiking prices that we’ve seen, especially over the last 12 months, are on the way to stabilizing in most of Canada. And in fact, and as you pointed out, the latest crop of numbers for the month of April is that we’re starting to see some some declines on a month over month basis, and the odds are they’re likely to decline a little bit more. So I think in a way, no, we’re leaving this frenzied market to a new phase of this cycle, which hopefully will bring a little bit kind of a cooler set of conditions, kind of a less of a fear of missing out, hopefully, so that the market will calm a little bit calmer. But don’t expect affordability suddenly to be right in front of us. I think the affordability will continue to be a major challenge. Speaker 1 [00:03:20] Right. And I mean, affordability was also a driving factor for many of my friends and peers deciding to move to sleepier markets during the pandemic. Nova Scotia. New Brunswick, Alberta. It’s the exodus out of the big cities that are busy economics as covered in depth. So with that in mind, as you look across the country, where are you seeing the most interesting trends or conditions and what’s surprising? Speaker 2 [00:03:42] You move, right? Right, right. And it’s an excellent point when we’re looking at the numbers for April, for example, you know, we saw Halifax, for example, still seeing huge price increases in a month and four month basis. There’s still tremendous pressure on that market. And and a big part of of that story is exactly what you described. You’ve got some very hot market over the past year where buyers were being priced out. And with the pandemic and no work from home opening new frontiers, we saw some significant movement towards other markets snowy exurbs of, of and Toronto or even cottage country. But we saw also a significant movement towards the Atlantic region where the locals are being a little put off because they’re seeing this this wave of Ontarians coming through with the larger budgets. But that that phenomenon is still ongoing as we speak, along. Speaker 1 [00:04:33] With interest rates leading to changing conditions. And I know that you mentioned that affordability still remains a challenge. It reminds me of an interesting term I came across in the latest courier report, buyer fatigue. And it’s not something that I’ve heard often. So can you explain to us what that means and how we’re seeing it play out? Speaker 2 [00:04:49] Now, we’ve been talking a lot about the lack of supply out there, but there was a lack of supply largely because demand was so incredibly strong over the last. Almost two years now. And a big part of that that I just mentioned a minute ago, the fear of missing out. But that that that has driven a lot of activity. A lot of people kind of precipitated that their decisions to lock in lower rates or no to buy at a time before prices were now have gone to high so that they were no basic in buying being priced out of market. And so all of these have led the way to tons of bidding wars which were now very common in large markets like Toronto and Vancouver. But those bidding wars have spread out across the country, and many markets had never really never seen them before. And now this tremendous pressure and frustration on the part of many buyers has led to that and buyer fatigue. Now they’re just like, okay, they’re done with having to try to outbid the competition. And now with a higher mortgage rates, now it’s making them more discouraged about entering those bidding wars. And the odds are we’re probably going to see a few and fewer of them. And when where there are bidding wars are probably going to see fewer participants. So it’s all kind of part of this cooling on the demand side that has basically started this spring. Speaker 1 [00:06:11] Yeah, I totally understand that. My partner and I have been trying to break into the market for the last year and a half and every time we feel like we had our savings goal, the market just gets a little bit further out of reach. So we gave up and I think that fits the pattern with a lot of folks across Canada. So the federal budget came out just a little while ago and introducing a number of measures to improve affordability, including building more homes and ending blind bidding, among others. How do these policies stack up, particularly now as we’re seeing the effects of higher rates on demand? What does this all mean for buyers? Speaker 2 [00:06:46] Right. Right. And in our view, is then that individually those measures, I think we counted something like 29 measures of housing related measures in the federal budget, and some of them address the supply side. But a number of them were targeting or trying to help no matter the affordability on the for buyers. And the thing to keep in mind is now some of those measures that were proposed are not effective right now, like a savings account for first time homebuyers. Now the government is stuck in 2023 and it’s a sort of program that will probably have an impact over the longer term. So our view is that individually, they’re probably not likely to to move the needle that much in terms of of affordability or trying to cool the market down. But in aggregate, overall, it could make an impression on buyers. But that being said, the bigger factor in the market right now is higher interest rates, that those interest rates are rising not only fast but a lot, especially on the variable mortgage side. So in our view, this is the game changer that the policy changes and those programs and proposed measures will probably contribute to some extend maybe at the margin. But the big the big one is higher rates. And this is, in our view, that’s leading to the turning point that we’re experiencing now in the market. Speaker 1 [00:08:14] Hoping to turn over now to the other side of the transaction and looking at sellers. How are they faring right now and what do you think they should be thinking about? Speaker 2 [00:08:22] I think they have to accept and realize that the market is starting. There’s a lot of expectations on the part of certain buyers that they saw that the neighbors down the street selling their house for one point something million and they’re expecting by putting the market up for sale now that it would fetch the same price, whereas in most of the country that they’re not going to get bids for the prices that prevailed just a few months ago. So maybe the strategies has to be revised. We’re seeing more and more realtors advising their clients now, not don’t set things up for a bidding war. And that’s an asset that an asking price that’s a little bit higher. So I think that they have to be to accept the new realities, to be more flexible, also to realize that they may not sell their home in hours. It may take a little bit of time and, you know, just a bit of a dose of reality when you look back in the history of the housing market and you don’t have to go that far back in most markets, it took like weeks and weeks to sell a home and not days. So I think they’ll have to adjust to this new reality. Speaker 1 [00:09:21] And a new reality. It definitely is. Thank you for joining us today, Rebecca. I really appreciate your time. Speaker 2 [00:09:27] It’s been my pleasure. Speaker 1 [00:09:29] And that’s a wrap for this week’s ten minute take. I’m Teresa Do. Join us next time as we explore innovation and how businesses and governments may have been thinking about it all wrong. We’ll chat with a globally known expert who recently wrote a book on the subject, as well as a winner of this year’s Governor General Innovation Awards. Talk to you soon. Speaker 3 [00:09:52] Disruptors, The ten minute take is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. It’s produced and recorded by JAR audio. For more disruptors content, like or subscribe wherever you get your podcasts and visit rbc dot com, slash disruptors.