Week 17: We can’t take the pain

In this issue: ▸ Are we seeing it (and ourselves) all wrong? ▸ Russia doubles fossil fuel revenues ▸ We can’t take the pain ▸ Is sustainability just a PR stunt? ▸ And much more...

Dear all, 

Broken perceptions. I was wrong, and I have been wrong for a long time.

My understanding, or let me put it this way, my genuine conviction was that we as a species, humans, understand and comprehend, have the ability to process the information threatening our very survival, at least to some extent…

It was and is naïve.

Our love for ourselves is, after all, not so grand. It is a contradiction. The anatomy of the human relationship to itself is still an enigma.

A good friend told me the other day that the way forward is way inwards, far more challenging, far more bumpy and dangerous. Changing the state of the world we are in is changing who we are, on so many levels.

Our journey towards the future seems to be much more dependent on our ability to transform our inner selves than all the technological developments that we are placing so much hope on.

We simply don’t have a choice, and we need to start talking about this.

It is about us, not about the climate crisis, not about the biodiversity collapse, the water shortages, the non-functioning financial system, it is about us. People either don’t have any information about this, don’t understand it, can’t put into the context, or simply avoid it.

There is no ill-will in it, we just need to do more on this. 

Are we seeing it (and ourselves) all wrong?

The Global Assessment Report (GAR2022), released by the UN Office for Disaster Risk Reduction (UNDRR) ahead of the Global Platform for Disaster Risk Reduction in May, reveals that between 350 and 500 medium- to large-scale disasters took place every year over the past two decades. The number of disaster events is projected to reach 560 a year, or 1.5 disasters a day, by 2030.

The GAR2022 blames these disasters on a broken perception of risk based on “optimism, underestimation and invincibility,” which leads to policy, finance and development decisions that exacerbate existing vulnerabilities and put people in danger.

You have to read it again… “optimism, underestimation and at the end invincibility”.

Yes, we are invincible, we have tamed nature (or at least we believe we have), but have we tamed who we are? 

“The world needs to do more to incorporate disaster risk in how we live, build and invest, which is setting humanity on a spiral of self-destruction,” said Amina J. Mohammed, Deputy Secretary-General of the United Nations, who presented the report at the UN headquarters in New York. The world sure does need to do that, and we must turn our collective complacency into action.

GAR2022 was drafted by a group of experts from around the world as a reflection of the various areas of expertise required to understand and reduce complex risks. You can read all the the findings of the report here.

Russia doubles fossil fuel revenues

The war in Ukraine continues, and will unfortunately continue for some time. People are dying, getting massacred, while we participate in conferences, go to work, jump on yet another Zoom meeting, participate in panel discussions. Absurd and true in the same sentence, at the same time and in the same world.

Russia has nearly doubled its revenues from selling fossil fuels to the EU during the two months of war in Ukraine, benefiting from soaring prices even as volumes have been reduced. More specifically, Russia has received about €62bn from exports of oil, gas and coal in the two months since the invasion began, according to an analysis of shipping movements and cargos by the Centre for Research on Energy and Clean Air.

For the EU, imports were about €44bn for the past two months, compared with about €140bn for the whole of last year, or roughly €12bn a month.

The findings demonstrate how Russia has continued to benefit from its stranglehold over Europe’s energy supply, even while governments have frantically sought to prevent Vladimir Putin using oil and gas as an economic weapon. Even though exports from Russia have been reduced by the war and sanctions, the country’s dominance as a source of gas has meant cutting off supplies has only increased prices, which were already high because of tight supply as global economies recovered from the Covid-19 pandemic.

Crude oil shipments from Russia to foreign ports fell by 30% in the first three weeks of April, compared with rates in January and February, before the invasion, according to the CREA data. Russia has effectively caught the EU in a trap where further restrictions will raise prices further, cushioning its revenues despite the best efforts of EU governments.

Read more here and here.

We can’t take the pain

What is the role of ESG investors in this context? A significant part of ESG investing is about risk management. Are we too optimistic, underestimating the risks, thinking we are invincible?

How do we react to this? We are investing in businesses that have no direct exposure but are dependent on Russian oil and gas in their production.

What is our take? It takes time to get rid of the dependency, it is a process.

These are the usual answers. Say that to a mother with two kids who have not seen the daylight for a month in the dungeons of Mariupol, waiting to get executed.

Russia invaded Ukraine in 2014, not 2 months ago. Shall we tell her that businesses open up countries and create more transparency and help in the democratisation processes? And give her our short list of the evidence for this?

Shall we explain how our lifestyle will be impacted, power cuts, queue, factories closing, and that we, after all, think it is terrible, but that we like it the way it is?

Putin’s move was a calculated one. Somewhere he understood that Western middle classes, and the politicians that represent them, will not jeopardise our lifestyle. We can’t take the pain. It is that simple.

This war forces us to say no, stop, we don’t want this anymore, to rebuild our economies on renewables, to stop being hostages to the fossil industry, to stand for something more.

How naïve I am. Pain is not on the menu in any Western economy. And it is certainly not on the ESG menu. 

We need more metals from unsustainable producers

Europe faces a critical shortage of clean-energy metals and needs to decide urgently how it will bridge the looming supply gap or risk new dependencies on unsustainable producers. That is the conclusion of a new study commissioned by Eurometaux, an industry group that represents some of the region’s biggest metal producers, including Glencore and Rio Tinto.

The report, written by Belgium’s Katholieke Universiteit Leuven, marks the first attempt to provide some EU-specific numbers around last year’s warning from the International Energy Agency (IEA) of supply challenges owing to the amount of metals needed for batteries, solar panels and wind turbines. It comes as the EU, which is aiming to be carbon neutral by 2050, looks to reduce its dependence on imported Russian energy and make a quicker switch to renewable energy.

“There is a risk . . . with the geopolitical developments we are seeing round the world that Europe . . . will not have the metal for its climate programme,” said Mikael Staffas, president of Eurometaux and chief executive of Boliden, one of Europe’s biggest metals and mining companies. He was speaking before the launch of the study in Brussels.

The report estimates that to meet its clean energy goals, Europe will require 35 times more lithium and seven to 26 times the amount of rare earth metals in 2050 compared with today. It will also need 1.5mn tonnes of copper (an increase of 35 per cent from today) and 400,000 tonnes of nickel (a 100 per cent increase). 

Read more.

The deforestation continues

Last fall, more than 140 world leaders made a pact to stop deforestation this decade, not long after dozens of countries vowed to conserve nearly a third of their land. But while policymakers deliberated, trees continued to get chopped down.

In the tropics, where nearly all deforestation takes place, farming, logging, and wildfires destroyed more than 11.1 million hectares (27 million acres) of trees last year, an area roughly the size of Virginia, according to a new analysis by the non-profit World Resources Institute (WRI). More than a third of that loss was in tropical “primary” rainforests — old and unharmed groves of trees that store huge quantities of carbon, which is now likely to renter the atmosphere where it will fuel climate change.

These losses extended to areas outside the tropics as well. In Russia, home to the largest forested area on Earth, wildfires wiped out more than 6.5 million hectares (16 million acres) of boreal, or snow, forest in 2021, roughly equivalent to the area of West Virginia, WRI’s analysis shows. (The organization typically doesn’t consider these losses “deforestation” because forests may grow back after a wildfire.)

Compared to 2021, the tropics lost slightly more primary forest in 2020. What’s surprising is that rampant deforestation continues, seemingly unbridled, even as companies and countries promise to save these ecosystems, which people and animals depend on.

What’s more, just a few places – and a few products – are behind the bulk of this destruction.

Read more.

Climate change → Animals relocate → New pandemics

Climate change will force wild mammals to relocate to new habitats, which could increase the spread of viruses between animal species, creating fertile ground for future pandemics, a new study has warned.

The research findings, published in the scientific journal Nature, used mathematical models to calculate how temperature and land use changes would alter the geographical range of the habitats of 3,139 mammals, and the knock-on effect that would have on viral transmission.

Even under an optimistic scenario, in which global temperature rises peak at 1.8C by the end of the century, researchers at Georgetown University who were behind the study projected that mammals shifting their geographic ranges to adapt to habitat changes “could create thousands of new opportunities for viruses to find new hosts”.

Future hotspots for cross-species viral transmission among wildlife are projected to overlap with densely populated urban areas in equatorial Africa, India, south China and south-east Asia, “further increasing vulnerability” to the spill over of novel pathogens that could give rise to the next pandemic, the researchers added.

A leading theory about the origin of Covid-19 is that it jumped from bats to civet cats before entering the human population. Similarly, it is widely accepted that HIV jumped from monkeys to chimpanzees and gorillas before spilling over into humans.

Researchers found that if mammals moved their habitats in line with climatic changes, that would lead to about 316,000 first encounters between species and at least 15,000 instances of pathogens being shared between animals for the first time by 2070. 

“Climate change is creating innumerable hotspots of future zoonotic risk,” said Colin Carlson, an assistant research professor in biology at Georgetown University who led the study. “We have to acknowledge that climate change is going to be the biggest upstream driver of disease emergence and we have to build health systems that are ready for that.”

Vale SA and its false ESG claims

There have been many engagements with this company for a very long time, and some awards have even been given to investors that have been actively impacting this company. Well. Now the Securities and Exchange Commission (SEC) charged Vale SA, a Brazilian mining company, with making false claims about safety prior to the collapse of its Brumadinho dam in 2019, a disaster in which 270 people were killed.

The SEC, in a complaint filed Thursday, alleges that beginning in 2016 Vale manipulated dam safety audits, obtained fraudulent stability certificates and, through its ESG disclosures, regularly misled governments, communities and investors about the safety of the Brumadinho dam. 

Is sustainability just a PR stunt?

Lastly, the findings in a recent survey are quite telling.

Thirty-five percent of U.S. executives, and 29% worldwide, agree with the phrase, “my company treats sustainability like a PR stunt,” according to a survey by Harris Poll of 1,491 CFOs and other executives in the C-suite or VP level across 14 markets. 

Many of these companies lead the way ESG portfolios around the world…

Oh, I almost forgot, pain is not on the menu! 

That will be all for this week. 

Kind regards,
Sasja