The best response that Shari’s friend could make is:
She could disagree with Shari because the pendulum converts gravitational potential energy into kinetic energy, then back into gravitational potential energy.
This response accurately reflects the principle of conservation of mechanical energy in a pendulum. As the pendulum swings, it converts gravitational potential energy (at the highest points, A and B) into kinetic energy (at the lowest point, C) and back again. Thus, energy transformation does occur as the pendulum moves.