Pico Analytics Fortnightly Newsletter : Food Instability, Green Energy and ESG's; Finding Hope in Troubling Times
The new year has arrived and we are looking forward to positive changes for the climate and sustainable investment. As Cop26 fades from the wider public discourse it has never been more important to share news on the various events occurring across the world and to hold governments and organisations accountable for their actions. The pledges and reforms of Cop26 are now in the early stages of implementation and any changes in consumer behaviour that become identifiable this year will be an indicator for the levels of commitment to sustainability that many have made over the last few months.
Whether you are making changes in small ways, such as taking on Veganuary and avoiding purchasing products containing unsustainable palm oil, or your making greater scale changes such as carrying out significant sustainable investment decisions for a large bank and lobbying politicians to move away from fossil fuel subsidies, such activities are of equal importance to the climate crisis as we attempt to mitigate its impacts and calm the oncoming storm. Whilst we cannot deny the importance of making changes we must recognise that people's capacity and ability to do so varies and that there is value in every attempt to help the environment. For the modern consumer, investor and stakeholder who expects sustainability and a smaller carbon footprint from the businesses and governments they choose to patronise or support, the coming year will be an important benchmark from which we will measure the success of future climate change decisions and actions.
Today's news is awash with reports on climate change which often remark on the unsustainable and damaging behaviour of companies and nations who choose to ignore the climate crisis. There are also glimmers of hope and success that grow daily as awareness spreads and communities take action to safeguard their futures. This newsletter provides a short summary of some of the most notable, informative and quirky climate stories of the past two weeks in the hope that it provides inspiration and insight into climate news from around the world. Finally, we want to hear from you, our readers, about any topics that interest you which we could either produce research papers on or include stories on within future newsletters.
OUR
TOP STORIES
Green Energy Push linked to Medium Term Inflation and Rising Energy Costs
by Martin Arnold on 8th January 2022
In a recent report by the Financial Times on Isabel Schnabel's (European Central Bank executive responsible for market operations) appearance at the annual American Finance Association meeting, the low-carbon economy and the medium-term costs this will pose were found to be at the heart of her speech. Ms. Schnabel was candid about the climate policies which are, in her views, likely to keep energy prices higher and pose a measurable risk to medium term levels of inflation. As energy prices drove inflation up by 5% in December the ECB are monitoring the situation carefully as they could possibly shift their current position due to the inflationary impact of the green energy transition.
Ms. Schnabel has suggested that central banks may need to break away from the common consensus that rising energy prices should be overlooked in order to secure stability long term. As energy prices in the Eurozone have risen by 26% on the previous December and wholesale electricity has quadrupled in price to €196 per kilowatt hour. Ms. Schnabel has implied that this consistent rise in prices coupled with the need to step up the fight against climate change could result in fossil fuel prices remaining elevated or even increasing further to meet the Paris Climate Agreement goals. Schnabel outlined two scenarios where monetary policies of major banks may need to shift course. The first being if persistently elevated prices produce a 1970's style wage spiral and economic uncertainty or in the second case policies such as carbon tax and measures to compensate poorer households who struggle to meet energy costs result in inflation which has been recognised in a number of recent studies.
These views have not been echoed by Philip Lane (ECB chief economist) who told the Irish broadcaster RTE that he does consider rising energy prices to be of significant concern but that they should be eased in the aggregate this year. It appears there are two separate camps which rely either on the current circumstances or future curves. If we are to follow the views of Mr. Lane then energy prices would not contribute to inflation over the next couple of years, though such estimates are conservative. This report does allow for the realities of shifting to a green economy and exposes the difficulties this may pose. However, we must consider and make plans for every outcome and attempt to ensure as much stability as possible for those who are struggling to meet the costs of rising energy bills.
Air Pollution and Water Crisis Connected to Delhi's Winter Smog
by BBC on 10th January 2022
Climate writer Mridula Ramesh has recently written on the connections between air pollution and the water crisis in India. As the nation loses an estimated $95bn (£70bn) to air pollution every year, major cities such as Delhi suffer from high levels of pollution as particles in the atmosphere mix at a lower height thereby increasing density. This, coupled with winds bringing fumes from the burning fields of the northwest and the millions of fireworks set off during Diwali contributes to the spike in pollution levels across the city. In November 2021, as the air quality became beyond hazardous, stubble burning (a government banned practice of burning straw and other crop residue) contributed to 42% of the pollution in Delhi.
As the fields struggle contend with a double crop rotation of paddy and wheat which lacks the natural water supplies to produce the sought yield, farmers are turning to groundwater to bridge the gap. As a result, groundwater supplies are dropping rapidly in the provinces of Punjab and Haryana. In the former, supplies are expected to run out within 20-25 years. This behaviour has been linked to the British presence in the 19th Century and the needs of the time to secure the North-Western front where British colonists redirected rivers, chopped down forests and imposed taxes that forced farmers away from growing traditional crops and towards more lucrative produce, this is likely to prove to have devastating future consequences.
In the 1960s farmers were given the resources to tap into groundwater supplies on a large scale. As flat power tariffs for borewells were cheapened until the point of being unpaid many farmers enjoyed decades of rich yields until water began to run low. In 2009 a new law was introduced to set out the exact times of year paddy could be planted which would further correlate with the monsoon season. This left a shorter period of time to plant wheat, leading to the burning of fields and the production of smoky plumes and air pollution.
To tackle the issue at hand Indians will either need to change their eating habits or alter their use of groundwater. Although increasing the cost of water qnd/or the electricity that powers the borewells is considered political suicide the time left to make a decision on the matter is rapidly running out. Worringly, the monetization of water in India could prove difficult and will have to navigate a minefield of corruption and complex climatic conditions. However, this report has highlighted the delicate balance of two essential key elements of human life and it is clear that it is necessary to combine the keen scientific minds of India with traditional ecological knowledge to identify the solution to resolve this crisis.
Ethiopia's Wonder Crop Possible Lifesaver in the Face of Climate Change
by Helen Briggs on 21st January 2022
"We need to diversify the plants we use globally as a species because all our eggs are in a very small basket at the moment," said Dr Borrell (Royal Botanic Gardens, Kew).
In a world obsessed with finding the next superfood that helps one lose weight or have perfect skin maybe it is time we redefine the word as scientists believe 'enset' a banana like crop, an Ethiopian staple, could potentially feed more than 100 million people in a warming world, with research suggesting the plant ,often used for porridge and bread, could be grown over a much larger range in Africa. Dr Wendawek Abebe of Hawassa University in Awasa (Ethiopia) suggests that this special plant could play an important role in addressing food security and contributing to sustainable development. 'Enset' with its banana-like look is actually inedible however, the starchy stems and roots of the crop can be fermented and used to make other food; staples which 20 million Ethiopians people currently rely on.
Wild relatives of this plant have been found growing as far south as South Africa, proving that the crop can tolerate a wide range of environmental conditions. Using agricultural surveys and modelling work scientists predict that enset could boost food security not just in Ethiopia but also in Kenya, Uganda and Rwanda as planting enset as a buffer crop to protect against lean times could stave off the more serious impacts of food insecurity. Enset can be planted and harvested at any time thereby providing protection against the hunger which will be caused by climate change in the years to come.
SIDS post-Cop26 Summary
by Kate Martin on 15th December 2022
Cop26 has proven, once again, to be a disappointment for Small Island Developing States (SIDS). To paraphrase the metaphor 'if a tree falls in the forest, and nobody is around to hear it, does it make a sound?' - many states are asking if a nation goes under water, and nobody wants to hear about it, where does that leave our people? As the Covid-19 pandemic hindered many representatives from areas such as the Pacific Islands from attending the conference, the leaders of the Global North and the highest emitting nations were able to avoid looking the leaders of sinking nations in the eye. The emotive speeches of Mia Mottley (President of Barbados), David Attenborough and Seve Paeniu (Tuvalu's Climate Minister) may have invoked widespread condemnation for those nations who continue to emit and pollute on a large scale, however, their wise, carefully considered words became today's news and fish and chips papers tomorrow. Without the support of nations such as the UK, USA, China and Russia these important speeches were ultimately as effective as shouting into a vacuum.
Cop26 was a reminder of how financial pledges to the tune of $100 billion per annum that had been previously agreed to by wealthier nations to help the developing world combat climate change and mitigate its impacts has failed to materialise (Milestone as Pacific Islands Leaders meet with the COP26 President-Designate - UN Climate Change Conference (COP26) at the SEC – Glasgow 2021, 2021). During Cop26 this commitment and number was not changed and has, instead, become an area for further discussion where nations make a point of proclaiming the need to meet and exceed these figures without making a concerted effort to do so. This is reflective of the majority of the agreements and pledges made at Cop26 as developed nations resist paying for loss and damages caused by climate change, with the notable exception of Scotland, who as the host of the proceedings, broke ranks and pledged £1 million to support those peoples on the front lines of climate induced disasters (Lo and Farand, 2021).
Whilst the 1.5° tagline of Cop26 retains popular support from the sloth-like politicians of the Global North, those leaders of small island developing nations who lack the resources to cope with the continuous climate disasters already plaguing their countries are desperate to avoid the inevitable reliance on climate financing from previous colonial oppressors. For SIDS who recognize that the 1.5° aim is already on life support, their future appears all the more uncertain as current estimates of temperature increase vary. These proud nations are now left asking ‘how will we protect and safeguard our people, and will we retain our sovereignty and identify when, (not if), our land goes under water’.
It would be inaccurate to state that Cop26 produced tangible, positive outcomes for SIDS. Instead, they have been left with empty promises, pledges of financial support which remain onerous and complex to access, and agreements which are at best idealistic and at worst entirely unfeasible. Whilst GDP growth and international political clout are considered more important than the natural world and human life the SIDS of this world will continue to pay the price for the emitters and Global North which whilst outwardly supportive and committed, is ultimately painfully slow to act in a sufficiently meaningful manner. How long can nations like the UK continue to state that SIDS require more money and increased support for climate mitigation projects without actually providing it?
Keep watching our LinkedIn and website to see the full paper, to be released next week.
Mexico's President Attempts to Turn Back the Clock and Miss Climate Goals
by The Economist on 8th January 2022
Mexican President Andrés Manuel López Obrador is turning back the clock on the country's economic liberalisation. Possibly in reflection of the big oil states of the Middle East, Mr Obrador is attempting to recreate the antiquated model of state-led and fossil-fuel-powered energy. He has funneled $8bn of public money into propping up a failing Pemex refinery and recently proposed a constitutional amendment handing back electricity to state controlled company CFE, which would be disastrous.
After the tentative opening of coal and oil industries in the 1990's to 2000's, private investment has shored up the industry and kept energy affordable. This in turn has proved useful to a burgeoning manufacturing industry and has inspired green energy firms to take an interest in the opportunities Mexico presents. As solar and wind power finds its place, Mr Obradors' plans appear, unfortunately, to be unsettling these newly developed industries. If the President is successful in bolstering CFE, the result would be a significant hike in energy prices which rely on the use of dirtier production, and a move away from greener, cheaper energy options. Independent regulators will be scrapped and if green private companies wish to sell, they can only do so through CFE. This could severely impact upon manufacturing as companies previously drawn in by trade agreements may turn away from Mexico as energy prices rise and high levels of greenhouse gas emissions fail to meet reduction pledges.
Mr Obradors' plans could do significant damage to the Mexican economy as the questionable legality of the President's actions threatens trade agreements, economic growth and the welfare of his own people. As the country moves out of one of the biggest economic contractions in recent history, Mexico is in need of investment which will be at risk if their energy sector experiences such negative changes.
The Financial Times Eight Essential ESG Topics for 2022
by Gillian Tett, Patrick Temple-West, Simon Mundy, Kristen Talman, Tamami Shimizuishi on 5th January 2022
We here at Pico Analytics are passionate about ESGs and hope that 2022 brings success and innovation in this field. This Financial Times eight point report is something of a ‘how to’ guide for those who are interested in ESGs and exhibits some of the top ESG schemes of 2022. You can read the full report here or peruse our shortened version below.
Scope 3 emissions: focusing on transparency and reduction - Emissions are categorized into three parts "Scope 1 emissions are those directly generated from a company’s core business; Scope 2 are those indirectly generated by energy bought by a company; Scope 3 are those indirectly created by its supply chain — and which represent 65-90 per cent of all emissions at many companies, according to Carbon Trust". Though Scope 3 emissions are exceedingly difficult to track, their importance nevertheless cannot be understated as corporate leaders must adopt a sense of lateral vision when viewing their companies carbon footprint. With the launch of Al Gore's ClimateTRACE system and the launch of the Gfanz (Glasgow Financial Alliance for Net Zero) agreement at COP26, corporations are now becoming responsible for the Scope 3 emissions of clients.
Private capital: ‘A paradigm shift is taking place’ amid hunt for climate deals - Over the course of 2021 private capital has shattered records as climate finance has grown and big private equity companies have honed in on the promising opportunities such investments present. Between November 2020-21 venture capital funds have invested $34.2bn in climate tech. The Securities and Exchange Commission are continuing to discuss forcing companies to relinquish more environmental information which could occur as early as 2023. For the time being the first move advantage in the private equity sector will drive transparency forward.
Green bonds: growth to the moon, but is it credible? - Sustainable bonds have reached a worth of $991.7bn in 2021 and are predicted to continue growing in 2022. However, investors are becoming increasingly discerning about what is considered green and sustainable. This has led to bonds including interim steps and performance targets as well as pushes for companies to make more ambitious climate promises.
Carbon markets: more growth ahead, amud rising scrutiny of offset quality -The carbon markets have come under a great deal of scrutiny in the past few years and as the Voluntary market starts to boom the Integrity Council for Voluntary Carbon Markets is looking to establish global standards for offsets. The cap and trade has hit €90 per tonne and there is hope that he German government will secure a price floor to ensure this price does not drop.
Sustainability accounting: global standards start to take shape - This is currently an area plagued with controversy as the EU's taxonomy for sustainable finance comes under pressure from various European states. Under the current draft nuclear power and natural gas are considered "green", a concept facing strong resistance. The taxonomy is crucial to sustainability disclosures as European authorities draw up this year's Corporate Sustainability Reporting Directive which will require 50,000 companies to disclose their impacts on the environment as well as the climate related risks they face. Similar movements are occurring across the Atlantic as both sides are hopeful that creating a worldwide framework for sustainability disclosures will deliver the "consistency and comparability" needed going forward.
The ‘S’ of ESG: employee activism soars - The pandemic has highlighted the need for corporations and governments to focus more on the Social side of ESGs. Companies are being put under pressure to boost diversity and increase their support for social issues in an equal manner to the way they have been supporting environmental issues. There is further importance placed on businesses practicing what they preach as their position on social issues must be reflected within their own companies internal operations and framework.
US-China relations: the green cold war - The tension between these two nations has been growing and is being exacerbated by China's human rights violations and the growing western demands for both China and its exports to meet their sustainable and ethical demands. As China has amassed control of rare minerals and natural resources across Africa, South America and Central Asia there are deepening concerns over whether the West can achieve its green transformation without China. For some Western nations who are turning to India in an attempt to bolster their position against China, Cop26 proved a disappointment as the two nations banded together to weaken coal pledges.
US climate policy: Biden confronts challenges at home as he tries to inspire global action - As one of the biggest players in climate politics America holds a deciding vote on whether or not our planet will have a future. As President Biden pledged to "lead by example" during Cop26 his $1.75tn Build Back Better Scheme, including $555 worth of climate related initiatives, has been stalled by the opposition and seems unlikely to progress. US Green Policy is in itself being held up to scrutiny as the government is taken to court by environmentalists for selling oil and gas leases on federal land and from Republicans looking to limit regulations on carbon emissions. Whether green measures can continue to be put into place at all remains to be seen on the run up to midterm elections. The next year could make or break America's green policies as Biden either remains committed to his current path or bends to the will of others.
If you or your company are interested in ESG integration then follow the links below or go to the Our Products section on our website to find out more about how we here at Pico Analytics can help you to achieve your goals in making your business more sustainable and successful.
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