Transitioning towards sustainable economy: Role of Financial Institutions

Transitioning towards sustainable economy: Role of Financial Institutions

Bibhu Mishra of Humboldt University, Berlin elaborates on Transitioning towards sustainable economy: Role of financial institutions such as Central Banks and financial systems in The Times of India.

Transitioning towards sustainable economy: Role of Central Banks and financial systems

Bibhu Mishra

Bibhu Mishra

“For peace to reign on Earth, humans must evolve into new beings who have learned to see the whole first”, said Kant. 

Climate change is real; it affects and will affect everyone. Mother Nature sends its signals regularly, and most recently through the flash floods in western Germany. These signals are an urgent reminder that we need to take action now. The action must be collective, significant, timely, and futuristic because, in the long term, the risks outweigh the costs. 

The Paris climate accord is one such step in the right direction. A holistic and stakeholder-driven approach would be required to achieve the target of maintaining temperature rise by 1.5 degrees Celsius. One of the most significant stakeholders in such efforts is the global financial system. The financial system’s role is pivotal because they provide finance and steer economic growth. Their actions have a significant impact on ESG, i.e., Environment, Society, and Governance.

There is a tremendous surge in investments which keeps ESG at the core of investment decisions. According to Bloomberg, ‘ESG assets may hit $53 trillion by 2025, a third of global AUM’. Despite a phenomenal rise in ESG assets in the past decade, the financial system still faces challenges like ‘short-termism’ and ‘greenwashing.’ 

Therefore, the role of Central Banks is vital. They look at the financial system of a country as a whole. Former Governor of the Bank of England, Mark Carney coined the concept ‘Tragedy of the Horizon’ to explain this. He argued, “the catastrophic impacts of climate change will be felt beyond the traditional horizons of most banks, investors and financial policymakers, imposing costs on future generations that the current one has no direct incentives to fix.” It is a tricky paradox where the current system has little or no benefits but to save the planet in its current state or better for the coming generations.

Realizing the importance of its role, eight central banks and supervisors created (In December 2017) a ‘Network of Central Banks and Supervisors for Greening the Financial System  (NGFS).’The NGFS is aimed to make coordinated efforts to combat climate change. As of June 30, 2021, the NGFS has grown to a network of 95 members and 15 observers. The Network’s purpose, in their own words; “to help strengthen the global response required to meet the Paris agreement’s goals and enhance the role of the financial system to manage risks and mobilize capital for green and low-carbon investments in the broader context of environmentally sustainable development.” 

The NGFS is a significant step towards bringing central banks of different countries together and ensuring that central banks take the leadership role in fighting against the climate crisis. In its first comprehensive report (Pub 2019), It came up with the following six suggestions and floated the idea of global collective leadership. 

  1. Integrating climate-related risks into financial stability monitoring and micro-supervision 
  2. Integrating sustainability factors into own-portfolio management 
  3. Bridging the data gaps 
  4. Building awareness and intellectual capacity and encouraging technical assistance and knowledge sharing 
  5. Achieving robust and internationally consistent climate and environment-related disclosure 
  6. Supporting the development of a taxonomy of economic activities

Additionally, the steps taken by the Central Banks of England (Bank of England) and France (Banque de France) are noteworthy and worth a mention.

Recently, the [Central] Bank of England launched a stress test for banks and insurers to understand the ability of the UK Financial system to cope with climate change. The test is aimed to examine the resilience of the UK’s 19 biggest banks and insurers. The stress test can also be looked at as an acknowledgement that Climate Change poses significant financial risks to the existing financial system. Therefore, early planning of a transition is necessary. 

Moreover, ‘Banque de France,’ the central bank of France, took several initiatives to transition the financial industry into zero carbon.  In June 2021, the French ACPR (Autorité de contrôle prudential et de résolution, English translation: French Prudential Supervision and Resolution Authority) published the first climate pilot exercise report an overall ‘moderate’ exposure to climate risks.

Let’s understand the risk through an example. Investing in fossil fuels may generate returns in the short term,’ but it will accelerate climate change and, hence, negatively impact the ESG. The negative impact on climate could cause erratic rains or severe drought, leading to an adverse effect on investments made in agriculture and allied sectors. One sector’s gain can be the loss of another sector, posing a significant risk before the overall financial system. 

To ensure a smooth transition of the financial system towards sustainability and make it resilient from other systemic risks, early and coordinated action is needed. Central Banks and financial systems have a significant role to play in our journey towards sustainability.

Bibhu Mishra is a German Chancellor Fellow at Alexander von Humboldt Foundation and a researcher with Institute of Asian and African Studies, Humboldt University, Berlin.

The picture above is for illustration and is of the IFC of World Bank Group blog.

Two Thousand Dinars: A Lamentable Legacy

Two Thousand Dinars: A Lamentable Legacy

Two Thousand Dinars: A Lamentable Legacy By Nejoud Al-Yagout is a story that is fairly common to all countries of the GCC.

The picture above is for illustration and is of the Parliament of Kuwait.

First, we heard that residents above the age of 60 would not be allowed to renew their residencies if they did not hold a college degree. Then, after outrage on social media (by locals, to be sure, since any outrage by a resident would lead to arrest or deportation), there was talk that the rule may not be implemented; instead, we heard that those who came up with the decree would, at least, reconsider the age bracket, perhaps hiking it up to residents over 70 years of age (which in and of itself is lamentable).

Then, it was back again to 60 a few months ago, but with a proposal to fine residents annually (that is when talk of KD 2,000 arose). This latter proposal brewed for a while until it was announced only recently – in the midst of a pandemic, in the throes of increased unemployment and suicides and drug-taking and crimes, and in the whirlwind of murders and corruption – that the Public Authority of Manpower would “allow” residents above the age of 60 who do not hold university degrees to renew their residency provided they pay an annual fee of KD 2,000; as though by making it look like a favor, a permission granted, so to speak, the harsh brutality of the cost of remaining in Kuwait would seem less pronounced, brushed under the rug.

Though already considered official by all of us who read about it in the news, it appears that the “decision” needs a couple more weeks, perhaps, to be considered bureaucratically official, unless a person with strings will use his position of power to take a stand against it. The likelihood of such a selfless act transpiring is well, let’s just say, unlikely. Highly unlikely.

Although many residents above 60 who have graduated from college may have breathed a collective, perhaps even audible, sigh of relief, many others will be in tears, for they have parents and siblings aged 60 and above who live with or near them and who do not hold college degrees, and they themselves, holders of college degrees, will not be able to afford such a fee to keep the family together. And what about us locals? We cannot ignore the two-thousand-dinar elephant in the room.

Many of us who work in the public or private sector, with or without university degrees, or even with Master’s degrees and PhDs, would not ourselves be able (or willing) to pay such a lofty fee. Two. Thousand. Dinars. Imagine. And if we think this will not affect us, we are wrong. “They” are us! They, who we consider expatriates and foreigners and residents are us. We are them. We are one in this society. All of us. Each one of us, a thread of the same fabric, interwoven. What hurts us hurts them and vice versa. Let this register for all of us. Again and again and again.

There are residents in their sixties who were born here and have lived here their entire lives; residents who do not want to go “home” because their “home” is here, in Kuwait, where they belong, with us. Kuwait is the land in which they want to be buried, in which their parents were buried. After all their years of service to our country, we are now showing them the door under the pretext of making rules we know people cannot implement, all so that residents can leave of their own accord.

But they will not leave of their own accord. Ever. They will leave because neither they nor their university-degree-holding families were able to pay such an outrageous sum; they will leave because they are tired of living in a country that does not want them here. So many have left already; others are waiting for the right moment to leave. Others are waiting anxiously to see whether things will get better (or get worse).

We cannot stay silent. We cannot. And the last thing residents need is sympathy; if we are to feel sorry for anyone, we should feel sorry for ourselves for who we have become. Instead of patronizing them with our sympathy, residents should be applauded for their resilience, their bravery, and their contribution. They should be rewarded; they should be given more benefits as time elapses, not less.

We have a lot to learn from them. Even while many are treated as second-class members of the community, they stay, they work, and they support their families. This rhetoric of residents profiting from us is immature and arrogant; we must remember they are doing us a favor, a huge one, by being here as well. We are in this together; and in a healthy community, that is how things work; we give and we take; we take and we give.

Some residents may still find a way to stay here, in their home. But with this new “fine,” there is no way they can save money or help their families. And how can we sleep at night knowing we are creating obstacles for residents to send money back home? How can we sleep at night knowing that there is no money to pay for a parent’s kidney transplant or a relative’s tumor removal or a child’s education because the money is being paid to an oil-rich country instead? What principles are we building our foundation on?

These are certainly not our principles. And as long as we hold on to these pseudo-principles, we will continue to create laws which protect us and ostracize others, laws which are far, far away from the values of our heritage, founded on hospitality and inclusivity. Aren’t we tired of this us vs them attitude? Do we really want a Kuwait for Kuwaitis? Is this our legacy? Can’t we remember who we are?

It’s done. All we can do now is lament and ensure we resurrect a new Kuwait based on the ideals of our welcoming forefathers who never flinched at demographics. All we can do now is remember that what goes around comes around. This is a law. It is not a doomsday prophecy, but a warning, an invitation to recalibrate, a chance, an opportunity, to restore the karmic balance.

This is our chance to wake up and ask ourselves: Is this our legacy? And we should ask ourselves this question every night. That way, we can rectify the situation before karma knocks on our door. Loudly and fiercely. Two thousand dinars. Let’s remember that number. For it may come back to haunt those of us who stayed silent, those of us who spoke out for justice only when it came to our rights and, often, at the expense of others.

local@kuwaittimes.com

 

Emerging Economies Must Leapfrog to Renewables

Emerging Economies Must Leapfrog to Renewables

Emerging Economies Must Leapfrog to Renewables – and They Already Are per Roya Sabri in this TRIPLEPUNDIT’s article.


Emerging Economies Must Leapfrog to Renewables – and They Already Are

20 July 2021

Renewables like solar and wind are quickly becoming more affordable and accessible. The International Renewable Energy Agency (IRENA) reports that the cost of electricity coming from utility-scale solar power fell 82 percent between 2010 and 2019, and clean power technologies such as solar and wind are undercutting even the cheapest coal-fired power plants. Further, a 2020 analysis from BloombergNEF found that wind and solar have overtaken fossil fuels as the most cost-effective form of new sources of electricity in most of the world.

This trend has made “energy leapfrogging” – i.e., the ability to reap a nation’s power needs from renewables such as solar, wind and geothermal at a rapid pace, bypassing heavy investments in fossil fuels and the infrastructure needed for them – ever more possible in emerging markets.

Economies, including several examples in Africa and Latin America, have been transitioning straight from what for many of their communities had been traditional sources of energy like wood, charcoal, agricultural waste and animal dung; these countries are also able to shift rapidly toward renewables as they have not invested in massive infrastructure that supports a national power grid, as was the case with what more industrialized nations in Europe and North America had done during the 20th century.

The result is that more communities within these emerging markets are forgoing conventional energy sources like fossil fuels; the same goes for other forms of energy like nuclear, biofuels and even natural gas.

A recent report from the think tank Carbon Tracker and India’s Council on Energy, Environment and Water (CEEW) highlights progress emerging nations are making in embracing renewables. The report also comes with a warning: If more nations do not leapfrog to these cleaner sources of energy, a worldwide low-carbon economy will not occur.

As the demand for energy grows, leapfrogging to renewables becomes necessary

The International Energy Agency estimates a surge in power generation in emerging nations will boom over the next decade, accounting for the majority of electricity demand by 2030. Thus, a world aiming to reduce greenhouse gas emissions has an incentive to ensure countries like India and China continue their developing infrastructure that is more conducive for renewables.

The authors of this Carbon Tracker and CEEW study find that emerging markets are already stepping away from fossil fuels. “Given the continued rapid growth rate of solar and wind, it is highly likely that emerging markets ex-China have already plateaued or reached peak demand for fossil fuels for electricity. China is likely to peak before 2025,” they write. China may still be a major coal consumer, but its solar sector is growing fast. Countries like Morocco, Nicaragua and Kenya have already made great leaps toward increased reliance on renewables.

Some nations are already leapfrogging to renewables

The Climate Reality Project details how Morocco, Nicaragua and Kenya have been able to turn their power generation sectors into ones that are more sustainable and resilient. Morocco, for one, has set a target of 42 percent renewable energy production by 2021 and 52 percent by 2030. It has stayed on track by building up its solar and wind power infrastructure. The North Africa country, in fact, now hosts one of the largest solar farms in the world.

After experiencing rolling blackouts due to energy insecurity a decade ago, Nicaragua is now on its way to sourcing 80 percent of its electricity from sources of renewables. By late 2020, Nicaragua’s burgeoning geothermal industry had brought the nation to 72 percent reliance on renewable energy sources.

Energy accessibility has been expanding in Kenya as decentralized solar has spread across the nation. The country is also making use of its geothermal power, which may reach 50 percent of its energy mix by 2040.

Clean energy can support a more resilient and healthy economy

These cases show that a dramatic shift to renewable energy can increase energy accessibility and stability. The economic case is significant. IRENA reported in 2016 that a doubling of renewables by 2030 could mean global GDP increases by over one percent, boosts social welfare investments by almost four percent and can add more than 24 million jobs.

While some nations have proved leapfrogging possible and beneficial, the authors of the Carbon Tracker and CEEW study note that there are serious barriers to building renewable energy reliance. Such hurdles include the intermittency of renewable sources, system costs, policies and deeply vested interests — but international actors can make a difference. The report recommends that international policymakers should focus their attention on countries currently dependent on fossil fuel imports that also have governments more amenable to policy solutions.

Finally, the authors contend that such nations are more receptive to a transition than countries that are more politically fragile. They are also in a stronger position than countries with economies largely driven by coal and gas exports. The result is that these countries that have found success with energy leapfrogging can become examples for their neighbors and help to bring more emerging nations closer toward a clean energy future.

Image credit: Antonio Garcia/Unsplash  

Carbon emissions to reach record levels in 2023

Carbon emissions to reach record levels in 2023


Carbon emissions to reach record levels in 2023 as stimulus spending fails to match net-zero ambition says IEA executive director Fatih Birol. Would the man nevertheless be heard at the oncoming COP 26 of Glasgow?

The picture above is for illustration and is of the Middle East in 24.

Carbon emissions to reach record levels in 2023 as stimulus spending fails to match net-zero ambition

By: Terence Creamer, CREAMER MEDIA EDITOR

Carbon emissions to reach record levels in 2023
Fatih Birol

The financial resources allocated by governments globally to clean-energy measures in response to the Covid-19 crisis currently represent only 2% of the $16-trillion in total fiscal support set aside for economic stimulus, the International Energy Agency’s (IEA’s) new Sustainable Recovery Tracker shows.

The $380-billion announced to support clean-energy actions as of the end of the second quarter of 2021 is set to be supplemented by an additional $350-billion a year between 2021 and 2023.

The IEA warns that such spending will fall well short of what is required to meet global climate goals and is expected to result in a surge in carbon dioxide (CO2) emissions.

The IEA calculates these allocations to represent only 35% of what is required to meet the Sustainable Recovery Plan outlined in its recent special report, titled ‘Net Zero by 2050: A Roadmap for the Global Energy Sector’.

The economic recovery measures announced to date would also result in CO2 emissions climbing to record levels in 2023 and continuing to rise thereafter.

While the CO2 trajectory is 800-million tonnes lower in 2023 than it would have been without any sustainable recovery efforts, it is still 3 500-million tonnes above the pathway set out in the Net Zero by 2050 report, which recommended $1-trillion of spending globally on clean-energy measures in recovery plans.

“Since the Covid-19 crisis erupted, many governments may have talked about the importance of building back better for a cleaner future, but many of them are yet to put their money where their mouth is,” IEA executive director Fatih Birol said in a statement.

“Not only is clean energy investment still far from what’s needed to put the world on a path to reaching net-zero emissions by mid-century, it’s not even enough to prevent global emissions from surging to a new record,” he warned.

The IEA found that governments have mobilised $16-trillion in fiscal support throughout the Covid-19 pandemic, most of it focused on emergency financial relief for households and firms.

Based on an analysis of over 800 policy measures across more than 50 countries, the tracker shows that government spending for energy-related sustainable recovery measures has been channelled mostly through programmes that already exist, such as energy efficiency grants, public procurement, utility plans and support for electric transport options.

In addition, most of this spending is in G20 economies, with recovery measures announced to date in advanced economies expected to meet 60% of the investment needs set out for these economies in the Sustainable Recovery Plan.

In emerging and developing economies this share falls to 20%, where many countries have focussed their more limited fiscal leeway primarily on emergency health and economic measures.

The tracker shows that, while advanced economies have earmarked about $76-billion a year in government spending from 2021 to 2023 for clean energy, emerging and developing economy governments have earmarked only $8-billion yearly over the same period.

A report published in March by the Global Recovery Observatory, an initiative of Oxford University’s Economic Recovery Project and the United Nations Environment Programme, also concluded that recovery spending was falling short of nations’ commitments to a sustainable recovery.

The analysis concluded that only 18% of recovery spending announced to the end of February could be considered ‘green’ and that this spending was mostly accounted for by a small group of high-income countries.

It also concluded that global green spending, to date, had been incommensurate with the scale of the ongoing environmental crises of climate change, nature loss and pollution. 

A stadium that is the first built in World Cup history meant to be torn down

A stadium that is the first built in World Cup history meant to be torn down

Posted by Zeena Saifi, CNN on 18 July 2021, is the story of Qatar’s Ras Abu Aboud stadium that is the first built-in World Cup history meant to be torn down after the games. Would the same authorities, at this conjecture, have second thoughts?

Qatar’s Ras Abu Aboud stadium is the first built in World Cup history that was meant to be torn down  after the games

It was once a quiet waterfront, only enjoying the occasional sounds from the nearby Gulf shores. Now, it’s a dizzying burst of color and life — soon to be filled with up to 40,000 screaming fans.

It is Qatar’s Ras Abu Aboud stadium — the first built in World Cup history that was meant to be torn down.

Molded out of 974 shipping containers atop Doha’s port, the Ras Abu Aboud will host seven matches up to the quarterfinals of the 2022 World Cup.

All the containers are made from recycled steel, and the number — 974 — symbolizes Qatar’s dialing code.

It’s both a symbol of the country’s sustainability pledge and a reflection of its identity.

After the tournament is over, many parts of the arena — including all the removable seats, containers and even the roof — will be dismantled and repurposed for use in other sporting or non-sporting events, either inside or outside of Qatar.

“The 40,000-seater venue can be dismantled in full and transported to be built again in a different country; or you could build two 20,000-seater venues,” Mohammed Al Atwan, project manager for Ras Abu Aboud told CNN.

“Really, all parts can be donated to countries in need of sporting infrastructure. This is the beauty of the stadium — the legacy opportunities are endless.”

Along with the opportunities he says it offers, Qatar is hoping the stadium will be a trailblazer for future football tournaments.

Sustainability challenge

FIFA report in June estimated the 2022 World Cup to produce up to 3.6 million tonnes of carbon dioxide, that’s 1.5 million tonnes of CO2 more than the 2018 tournament in Russia created.

Nonetheless, the Gulf state is committed to delivering a carbon-neutral World Cup through offsetting emissions — before, during and after the event.

Organizers have promised sustainable building methods during the construction of the tournament’s infrastructure, such as the Ras Abu Abboud stadium, adding that they have procured “building materials that maximize resource efficiency and reduce emissions, waste and impacts on biodiversity.”

The SC says it is committed to keeping sustainability a main focus throughout the tournament — an example of this is planting trees and plants around the World Cup’s infrastructure to mitigate greenhouse gas emissions.

The onus, however, isn’t just on the organizers. Qatar says it will give recommendations to attendees and participants of the tournament on how they can reduce their own greenhouse gas emissions, including from travel, accommodation and food and beverage.

Once the spectacle is over, Qatar says it will offset any emissions generated during the tournament through building two mega solar power plants over the following 10-15 years, and by proactively supporting sustainable and low-carbon events in Qatar and the region

The reusability of the stadium’s parts is a reflection of that effort.

“Sustainability and legacy have always been at the forefront of Qatar’s planning and preparations for the World Cup,’ said Al Atwan.

When coming up with the stadium’s design, Al Atwan said movability was the main consideration for choosing shipping containers as the building blocks.

Containers are designed to be transported, either by air or sea, but when joined together to form a whole, they transform into a sturdy structure.

That ended up reducing the waste created on site during construction, says Al Atwan, adding that the Ras Abu Aboud Stadium has set a benchmark for sustainable and green mega-sporting event infrastructure.

Unlike the other seven Qatar 2022 venues, Ras Abu Aboud’s temporary nature meant that fewer building materials were required, keeping construction costs down and shortening the time needed to complete it.

Construction on the 4.8 million square feet (450,000 square meters) site commenced in late 2017 and is scheduled for completion by the end of this year, according to organizers.

Cooling sea breeze

When a fan steps outside Ras Abu Aboud, they’re met by Doha’s West Bay skyline. So when the sun goes down, a symphony of color — exchanged between the shimmering skyscrapers on one side and the stadium on the other — reflects off the shores and lights up the city.

And that proximity to the water doesn’t only offer attractive views.

All of Qatar’s World Cup stadiums are equipped with highly efficient cooling systems that maintain a comfortable atmosphere regardless of the hot temperatures outside.

But Ras Abu Aboud doesn’t need one because it gets a natural cool breeze from the sea nearby.

“Post-2022, the redevelopment of the site could take many forms and its legacy plans are still being finalized. It could be redeveloped into a public green space or used for a mix of commercial and residential projects,” said Al Atwan.

“It’s prime location means it’s suited to many projects and has an exciting future,” he added.

That future is not only physical, Al Atawan tells CNN. “Mega-sporting events like the FIFA World Cup have the power to inspire, prompt innovation and push existing boundaries to achieve new levels of success.”

Read: World Cup 2022: Qatar is ready as it strongly contests accusations of workers’ rights abuses

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