China’s Global Investments Declining Everywhere Except for the MENA

China’s Global Investments Declining Everywhere Except for the MENA

Foreign Policy’s INFOGRAPHIC published this article written by AFSHIN MOLAVI on May 16, 2019. It is about China’s Global Investments Declining Everywhere Except for the MENA as clearly showing in Three charts highlight Beijing’s growing interest in the Middle East and North Africa.

As Chinese President Xi Jinping concluded the latest high-level Belt and Road gathering of world leaders in Beijing last month, China’s signature project has seemingly entered a new phase: worldwide acceptance of the Belt and Road Initiative (BRI) as a fact of international life (like it or not). So, with the wind at its back, is China doubling down on its investments worldwide? Not exactly. The total value of China’s global investments and construction contracts actually fell by $100 billion in 2018, according to data analyzed from the American Enterprise Institute’s China Global Investment Tracker. Just about every region saw a significant decline in Chinese investment or construction projects except, surprisingly, for one: the Middle East and North Africa (MENA).

A flurry of Chinese investment and construction projects in the MENA region over the last three years has made it a key geoeconomic partner for Beijing. But surely, in pure volume terms, the MENA region could not have attracted as much Chinese economic activity as sub-Saharan Africa or East Asia, right? Think again. The MENA region ranked as the second-largest recipient of investment and Chinese construction projects worldwide after Europe in 2018, as the chart below shows.


MENA’s Growing BRI Clout

In 2018, the Middle East and North Africa leapfrogged other emerging markets as a destination for BRI projects.

SOURCE: AEI CHINA GLOBAL INVESTMENT TRACKER, 2005-2018; COMPILED AND CONCEIVED BY AFSHIN MOLAVI.

The MENA region ranked ahead of traditional BRI stalwarts East Asia and sub-Saharan Africa last year, recording $28.11 billion in new projects. The region still lags behind both those regions as a whole since the launch of BRI in 2013 and dating back to 2005, but a three-year surge has brought it in closer proximity to the top of the table. That could mean a windfall for Chinese state-owned construction companies as the majority of MENA projects involve construction, rather than foreign direct investment.

Of the 2018 MENA total, nearly three-quarters was targeted at Egypt, the United Arab Emirates, and Saudi Arabia. Those three countries also make up half of the “$20 billion club”—the group of countries with more than $20 billion worth of projects from China dating back to 2005.


Chinese Investment in MENA Countries

MENA countries with more than $20 billion worth of investment and construction projects by Chinese firms since 2005.

SOURCE: AEI CHINA GLOBAL INVESTMENT TRACKER, 2005-2018; COMPILED AND CONCEIVED BY AFSHIN MOLAVI.

The list here is heavily skewed toward regional oil producers, with the exception of Egypt, and most of China’s projects in the region involve construction rather than investment. Despite a recent setback, Chinese state-owned enterprises will likely play a prominent role in Egypt’s ambitious infrastructure program, including the building of a new, gleaming capital city just outside Cairo. Chinese construction companies were vitalin President Abdel Fattah al-Sisi’s ambitious Suez Canal economic zone project.

At the Belt and Road Forum last month, Chinese enterprises also announced a new $3.4 billion investment to build a trade hub for Chinese goods in Dubai’s Jebel Ali Port, as well as a manufacturing and processing hub for animal and agricultural products for the food industry. China’s dramatic ramp-up of projects in the UAE suggests that it sees the country as an important piece of its Belt and Road logistics network.

Other significant nodes of China’s economic footprint in the region are Israel ($12.19 billion), Kuwait ($10.43 billion), and Qatar ($7.27 billion), according to data analyzed from AEI’s China Global Investment Tracker for the years 2005-2018.

China is pouring a lot of concrete and cement into construction projects in the region but what of Middle East exports to China? How is China affecting the bottom line of key MENA states?

The answer broadly: If you have oil or gas, China is likely to be a major export destination.


Exports to China From MENA Countries

China has emerged as a vital export destination for several countries in the Middle East and North Africa. For these countries below, China made the top five in 2018.

SOURCE: IMF DIRECTION OF TRADE STATISTICS; COMPILED AND CONCEIVED BY AFSHIN MOLAVI.

Major oil and gas producers generate significant revenues from Beijing, and China ranks as the top export destination for Saudi Arabia, Iran, Kuwait, and Oman, according to an analysis of data from the International Monetary Fund’s Direction of Trade Statistics.

In some cases, key U.S. allies such as the UAE send nearly three times more exports to China than to the United States, and for Kuwait, Qatar, and Oman, the gap is even starker, with nearly eight times, nearly nine times, and nearly 28 times, respectively, more goods exported to China than to the United States.

For Saudi Arabia, the difference in 2018 was less stark, sending some 30 percent more exports to China than to the United States, according to an analysis of IMF data. Expect this gap to widen as the United States continues to ramp up domestic oil production.

Meanwhile, most North African countries still maintain an export profile heavily dependent on Europe rather than on China, and Israel sends four times more goods to the United States than to China.

You can expect this map to get to darker shades of red over the next decade, particularly as China’s demand for energy—especially natural gas—continues to grow.

Afshin Molavi is a senior fellow at the Foreign Policy Institute of Johns Hopkins School of Advanced International Studies and the editor and founder of the New Silk Road Monitor blog.

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Fossil Fuel Complicity as No Longer Hidden

Fossil Fuel Complicity as No Longer Hidden

­CleanTechnica Fossil Fuels elaborated on the more and more overwhelming tendency of eying Fossil Fuel complicity as no longer hidden in America’s investments institutions. as well as elsewhere in the world. Here it is.

Fossil Fuel Complicity No Longer Hidden Behind ‘Fiduciary Duty’

May 7th, 2019 by Carolyn Fortuna 

They’re not giving up. Yes, several attempts were defeated to persuade the Massachusetts municipal and county retirement systems to remove fossil fuel investments from their portfolios. But the Massachusetts Legislature is still considering measures that open up possibilities for divestment. To do otherwise, they argue, is to engage in fossil fuel complicity.

And they’re not alone. All over the US, organizations are pushing for divestments within institutions and municipalities. Led by FossilFree.org, individuals and advocacy groups are raising the discourse around the necessity to stop and ban all new oil, coal, and gas projects bypassing local resolutions to divest and by building community resistance.

fossil fuel complicity

Divestment has been a tool used to promote social change since at least the 1970s, when anti-apartheid activists urged institutions to move their investment dollars away from companies that did business with South Africa. Fossil fuel divestment has been gaining momentum in recent years, with more than 1,000 institutions pledging to remove $8.55 trillion from investments in the fossil fuel sector.

fossil fuel complicity

Fiduciary Duty is Now a Companion Argument to Social & Environmental Reasons to Divest

In 2017, Somerville, Massachusetts’ governing board agreed to move $9.2 million — 4.5% of the total invested funds — out of fossil fuel investments. The regulatory body that oversees public pension systems rejected the move, however, with reasons ranging from procedural to breach of fiduciary duty. The Massachusetts Public Employee Retirement Administration Commission (PERAC) claimed Somerville was failing to put the financial needs of its beneficiaries ahead of social and environmental causes. PERAC oversees 104 public pension plans across the state, with about $86 billion in total assets.

However, 2 counterarguments quickly made that position untenable.

  1. Demand for fossil fuels is likely to drop as much of the global economy shifts to renewable energy.
  2. Increased storm frequency due to climate change can cause supply chain disruption and infrastructure damage for oil companies.

“From the fiduciary perspective, there are a lot of questions as to the economic health of the fossil fuel sector moving forward,” Alex Nosnik, a member of the Somerville board, said. “Risk, certainly in concert with the environmental and social issues, was driving our decision to move forward.”

Ultimately, after lots of divestment advocates worked alongside sympathetic legislators to craft a local option bill that would authorize any municipal or county retirement system to divest from fossil fuels should they so choose. Standalone bills have been filed in the House and Senate; similar language has also been included in a wide-ranging clean energy bill pending in the Senate.

Several of the state’s environmental groups have come out in favour of these measures, including the Massachusetts chapter of the Sierra Club, the Green Energy Consumers Alliance, and the Climate Action Business Association.

“We have to stop putting money into fossil fuels,” said Deb Pasternak, director of Sierra Club Massachusetts. “We need to take our money and direct it toward the renewable energy economy.”

Read more on CleanTechnica.

MENA debt boom leading to private sector growth

MENA debt boom leading to private sector growth

Mouayed Makhlouf says governments have become more receptive to private sector involvement in economies as debt levels have grown reports Zawya #financial services.

Zawya produced this article dated March 12, 2019, about how the MENA debt boom leading to private sector growth would afterall result in a more sustainable development model.

MENA debt boom provides a route for private sector growth: IFC chief

By Michael Fahy, ZAWYA

Governments in the Middle East are becoming more receptive to growing private sector involvement in their economies because public sector debt in many markets is ballooning, an official from the World Bank’s International Finance Corporation (IFC) has said.

Speaking on an investors’ panel debate at the Global Financial Forum in Dubai on Monday, the IFC’s Middle East and North Africa (MENA) director, Mouayed Makhlouf, said: “For the first time, because of the massive rise in public debt across the region, we see a difference. Our narrative with these governments has changed.  Now, they are coming to us and they are saying ‘can you help us with the reforms?'”

General view of the world’s tallest building Burj Khalifa in Dubai, United Arab Emirates, December 22, 2018. Image for illustrative purposes. REUTERS/Hamad I Mohammed

Makhlouf said that the MENA region needs to create 300 million new jobs – “basically, double the population” by 2050 due to the burgeoning youth population in the region, and that Egypt alone needs to create around 700,000 jobs per year, although he said it is MENA’s fastest growing economy currently, with GDP growth of 5.3 percent, compared with a regional average of around 2-3 percent.

“The social contract in MENA is as such where most of the services (are) provided by the public sector.  But what you have ended up with… is a huge public debt that has been rising for the past few years,” he said, adding that debt-to-GDP ratios stand at around 96 percent in Egypt, 97-98 percent in Jordan and 150 percent in Lebanon.

“For us, the main thing we need to find in this region are… growth and jobs.  And I really believe both of these things can only come through a larger private sector participation,” Makhlouf said.

In a separate panel on the outlook for the region’s banking sector, JP Morgan‘s Asif Raza said that the decline in oil prices that began in 2014 had created opportunities for international banks to advise governments that are looking to diversify on how to embark on “monetisation and privatisation” of assets.

Naveed Kamal, MENA head of corporate banking at Citi, said that governments had run up deficits as oil revenues fell, and had financed these through “various instruments where banks have been involved”.

“And we expect to see that continue over the next 2-3 years.”

Although total GCC fixed income issuance declined by 16 percent year-on-year to $145.3 billion in 2018 as oil prices rallied, according to Kamco Research, JP Morgan’s Raza said the current pipeline is “huge”.

A faster flow

Raza said that at this stage last year, “over $15.4 billion worth of issuance was done in the MENA region – this year, it’s $28 billion”.

He added that in 2018, “the loan market was (at an) all-time high in this region”.  Figures published earlier this month from Acuris showed that syndicated loan activity in the MENA region last year outstripped bond issuance – with $133 billion of syndicated loans issued, compared to $89.5 billion in bonds.

Raza said that at the top end of the corporate banking market, “there’s lots of activity still happening”.

“There’s still quite a decent pipeline of financing and refinancing,” he said.

However, Citi’s Kamal argued that the market has been much tougher for SMEs in recent years.

“I believe that there is room for improvement for all countries in the region as far as creating the right balance for SMEs (is concerned),” he said.

He said that “time and again” in tougher economic times large corporates, government-related entities and even government departments have delayed payments to SMEs, which causes cashflow problems and affects their ability to repay creditors.

Quick exits

“And some of the legal framework that surrounds the corporate sector – we all know about bounced cheques and the consequences of that.  In summary, what happens is SMEs can’t stay back in a number of cases (to) fight through these cycles.  So, we see skips, people leave and that does not leave a very strong impact as far as consumer confidence is concerned.”

Yet funding shortages for private sector firms can also create opportunities – not least for the region’s private equity sector, according to Karim El-Solh.

Speaking on the investment panel, El-Solh said that his firm’s pipeline “has increased dramatically as a result of a lack of availability of funding for businesses elsewhere.

“The IPO market is not open; the bank liquidity has dried up so for us it’s an opportunity to come and be a provider of growth capital.  We are seeing more companies, better quality companies, we’re acquiring controlling stakes at lower valuations,” he said.

Makhlouf said more opportunities need to be created for the private sector, stating that levels of private sector involvement in the economy in the region lag behind other emerging markets.

“MENA region is only one-fifth in terms of private sector participation compared to Latin America,” he said.

© ZAWYA 2019

Why we’re living in the ‘Asian Century’

Why we’re living in the ‘Asian Century’

This article originally appeared on Fast Company, it was republished by the World Economic Forum on 8 March 2019. It is to be noted that in the eastern end of the MENA region, notably in the Gulf Cooperation Countries, Asian populations and investments happily cohabitate with the respective native minorities.

The centre of the world. Image: REUTERS/Danish Siddiqui

Why we’re living in the ‘Asian Century’

By Parag Khanna, Senior Research Fellow, Lee Kuan Yew School of Public Policy, National University of Singapore

This excerpt is from Parag Khanna’s book “The future is Asian”. The book was chosen as February’s book for the World Economic Forum Book Club. Each month, a new book will be selected and discussed in the group. The author will then join in on the last day of the month to reply to some questions from our audience.

Join here: wef.ch/bookclub

When we look back from 2100 at the date on which the cornerstone of an Asian-led world order began, it will be 2017. In May of that year, sixty-eight countries representing two-thirds of the world’s population and half its GDP gathered in Beijing for the first Belt and Road Initiative (BRI) summit. This gathering of Asian, European, and African leaders symbolized the launch of the largest coordinated infrastructure investment plan in human history. Collectively, the assembled governments pledged to spend trillions of dollars in the coming decade to connect the world’s largest population centers in a constellation of commerce and cultural exchange—a new Silk Road era.

The Belt and Road Initiative is the most significant diplomatic project of the twenty-first century, the equivalent of the mid-twentieth-century founding of the United Nations and World Bank plus the Marshall Plan all rolled into one. The crucial difference: BRI was conceived in Asia and launched in Asia and will be led by Asians. This is the story of one entire side of the planet—the Asian side—and its impact on the twenty-first-century world.

The Future Is Asian: Commerce, Conflict, And Culture In The 21st Century Image: Simon & Schuster / Hachette, February 2019

Asians once again see themselves as the center of the world—and its future. The Asian economic zone—from the Arabian Peninsula and Turkey in the west to Japan and New Zealand in the east, and from Russia in the north to Australia in the south—now represents 50 percent of global GDP and two-thirds of global economic growth. Of the estimated $30 trillion in middle-class consumption growth estimated between 2015 and 2030, only $1 trillion is expected to come from today’s Western economies. Most of the rest will come from Asia.

The Future Is Asian: Commerce, Conflict, And Culture In The 21st Century Image: Simon & Schuster / Hachette, February 2019

Asia produces and exports, as well as imports and consumes, more goods than any other region, and Asians trade and invest more with one another than they do with Europe or North America. Asia has several of the world’s largest economies, most of the world’s foreign exchange reserves, many of the largest banks and industrial and technology companies, and most of the world’s biggest armies. Asia also accounts for 60 percent of the world’s population. It has ten times as many people as Europe and twelve times as many people as North America. As the world population climbs toward a plateau of around 10 billion people, Asia will forever be home to more people than the rest of the world combined. They are now speaking. Prepare to see the world from the Asian point of view.

To see the world from the Asian point of view requires overcoming decades of accumulated—and willfully cultivated—ignorance about Asia. To this day, Asian perspectives are often inflected through Western prisms; they can only color to an unshakable conventional Western narrative, but nothing more. Yet the presumption that today’s Western trends are global quickly falls on its face. The “global financial crisis” was not global: Asian growth rates continued to surge, and almost all the world’s fastest-growing economies are in Asia. In 2018, the world’s highest growth rates were reported in India, China, Indonesia, Malaysia, and Uzbekistan. Though economic stimulus arrangements and ultralow interest rates have been discontinued in the United States and Europe, they continue in Asia. Similarly, Western populist politics from Brexit to Trump haven’t infected Asia, where pragmatic governments are focused on inclusive growth and social cohesion. Americans and Europeans see walls going up, but across Asia they are coming down.

Rather than being backward-looking, navel-gazing, and pessimistic, billions of Asians are forward-looking, outward-oriented, and optimistic.

These blind spots are a symptom of a related oversight often found in foreign analyses of Asia, namely that they are actually about the United States. There is a presumption that Asia (and frankly every other region as well) is strategically inert and incapable of making decisions or itself; all it is waiting for is the US leadership to tell them what to do. But from the Asian view, the past two decades have been characterized by President George W. Bush’s incompetence, President Barack Obama’s half-heartedness, and President Donald Trump’s unpredictability.

The United States’ laundry list of perceived threats—from ISIS and Iran to North Korea and China—have their locus in Asia, but the United States has developed no comprehensive strategy for addressing them. In Washington it is fashionable to promote an “Indo-Pacific” maritime strategy as an antidote to China’s Belt and Road Initiative, failing to see how in reality Asia’s terrestrial and maritime zones cannot be so neatly separated from each other. For all their differences, Asians have realized that their shared geography is a far more permanent reality than the United States’ unreliable promises. The lesson: the United States is a Pacific power with a potent presence in maritime Asia, but it is not an Asian power.

The Future Is Asian: Commerce, Conflict, And Culture In The 21st Century Image: Simon & Schuster / Hachette, February 2019

The most consequential misunderstanding permeating Western thought about Asia is being overly China-centric. Much as geopolitical forecasters have been looking for “number one,” many have fallen into the trap of positing a simplistic “G2” of the United States and China competing to lead the world. But neither the world as a whole nor Asia as a region is headed toward a Chinesetianxia, or harmonious global system guided by Chinese Confucian principles. Though China presently wields more power than its neighbors, its population is plateauing and is expected to peak by 2030. Of Asia’s nearly 5 billion people, 3.5 billion are not Chinese.

Asia’s future is thus much more than whatever China wants. China is historically not a colonial power. Unlike the United States, it is deeply cautious about foreign entanglements. China wants foreign resources and markets, not foreign colonies. Its military forays from the South China Sea to Afghanistan to East Africa are premised on protecting its sprawling global supply lines— but its grand strategy of building global infrastructure is aimed at reducing its dependence on any one foreign supplier (as are its robust alternative energy investments).

China’s launching the Belt and Road Initiative doesn’t prove that it will rule Asia, but it does remind us that China’s future, much like its past, is deeply embedded in Asia. BRI is widely portrayed in the West as a Chinese hegemonic design, but its paradox is that it is accelerating the modernization and growth of countries much as the United States did with its European and Asian partners during the Cold War. BRI will be instructive in showing everyone, including China, just how quickly colonial logic has expired. By joining BRI, other Asian countries have tacitly recognized China as a global power—but the bar for hegemony is very high. As with US interventions, we should not be too quick to assume that China’s ambitions will succeed unimpeded and that other powers won’t prove sufficiently bold in asserting themselves as well. Nuclear powers India and Russia are on high alert over any Chinese trespassing on their sovereignty and interests, as are regional powers Japan and Australia. Despite spending $50 billion between 2000 and 2016 on infrastructure and humanitarian projects across the region, China has purchased almost no meaningful loyalty. The phrase “China-led Asia” is thus no more acceptable to most Asians than the notion of a “US-led West” is to Europeans.

China has a first-mover advantage in such places where other Asian and Western investors have hesitated to go. But one by one, many countries are pushing back and renegotiating Chinese projects and debts. Here, then, is a more likely scenario: China’s forays actually modernize and elevate these countries, helping them gain the confidence to resist future encroachment. Furthermore, China’s moves have inspired an infrastructural “arms race,” with India, Japan, Turkey, South Korea, and others also making major investments that will enable weaker Asian nations to better connect to one another and counter Chinese maneuvers. Ultimately, China’s position will be not of an Asian or global hegemon but rather of the eastern anchor of the Asian—and Eurasian—megasystem.

The Future Is Asian: Commerce, Conflict, And Culture In The 21st Century Image: Simon & Schuster / Hachette, February 2019

The farther one looks into the future, therefore, the more clearly Asia appears to be—as has been the norm for most of its history—a multipolar region with numerous confident civilizations evolving largely independent of Western policies but constructively coexisting with one another. A reawakening of Western confidence and vitality would be very welcome, but it would not blunt Asia’s resurrection. Asia’s rise is structural, not cyclical. There remain pockets of haughty ignorance centered around London and Washington that persist in the belief that Asia will come undone as China’s economy slows or will implode under the strain of nationalist rivalries. These opinions about Asia are irrelevant and inaccurate in equal measure. As Asian countries emulate one another’s successes, they leverage their growing wealth and confidence to extend their influence to all corners of the planet. The Asianization of Asia is just the first step in the Asianization of the world.

‘Permanent Oil Price Decline,’ a Global ‘Shockwave’?

‘Permanent Oil Price Decline,’ a Global ‘Shockwave’?

Common Dreams published on Friday, March 08, 2019, this post on a fundamental but newly rediscovered fact of life.  

“The decision should sound like a red alert for private banks and investors whose oil and gas assets are becoming increasingly risky and morally untenable,” say climate campaigners.

Citing ‘Permanent Oil Price Decline,’ Norwegian Fund’s Fossil Fuel Divestment Could Spark Global ‘Shockwave’

By Jon Queally, staff writer

The Norwegian government announced Friday a bold recommendation for the Norwegian Sovereign Wealth Fund to divest all its holdings, worth nearly $40 billion, from oil and gas industries. The proposal, if approved by the nation’s parliament, would see the world’s largest sovereign wealth fund worth $1 trillion, divest from all fossil fuels. (Photo: Pixabay.com)

In a move that climate campaigners say should send a “shockwave” through the global oil and gas industry, the Norwegian Sovereign Wealth Fund—the largest of its kind in the world—has recommended the Norway government divest the entirety of the fund’s $40 billion holdings from the fossil fuel industry.

“If [proposal passes through parliament it will produce a shockwave in the market, dealing the largest blow to date to the illusion that the fossil fuel industry still has decades of business as usual ahead of it.” 
—Yossi Cadan, 350.org

In a statement on Friday, Minister of Finance Siv Jensen explained the decision is meant to “reduce the vulnerability” of the Norwegian fund “to permanent oil price decline.” With an estimated $1 trillion in total holdings, Norway’s Sovereign Wealth Fund is the largest publicly held investment in the world. According to a spokesperson for the finance ministry, the fund currently has roughly 66 billion Norwegian krone ($7.5 billion) invested in energy exploration and production stocks—approximately 1.2% of the fund’s stock portfolio.

The recommendation from the Norwegian fund will now be sent to the nation’s parliament for approval.

Climate groups that have pushed aggressively for divestment from the fossil fuel industry in recent years as a key way to decrease the threat of greenhouse gases and runaway global warming celebrated the announcement as a possible crucial turning point.

“We welcome and support this proposal,” said Yossi Cadan, senior divestment campaigner at 350.org, “if it passes through parliament it will produce a shockwave in the market, dealing the largest blow to date to the illusion that the fossil fuel industry still has decades of business as usual ahead of it. The decision should sound like a red alert for private banks and investors whose oil and gas assets are becoming increasingly risky and morally untenable.”

Bill McKibben, one of the group’s co-founders, called it a “huge, huge, huge win.”

In a statement, 350 added:

In order to avoid the most catastrophic impacts of climate change and keep global warming below 1.5°C we have to keep fossil fuels in the ground and shift finance towards sustainable energy solutions for all. Climate impacts are already hitting home and we have no time left to lose. Last year Nordic heatwaves, wildfires in the Arctic Circle and alarming news of the thickest Arctic sea ice starting to break up, showed how climate change is close to home for Norway. It seems unthinkable for Norwegian financiers to continue to invest in companies that are causing this chaos.

Catherine Howarth, chief executive of ShareAction, which provides analysis for investors focused on creating a more sustainable society, said the Norwegian fund’s announcement “is further evidence that investors are growing increasingly dissatisfied with oil exploration and production companies.”

Institutional investors that manage sovereign wealth funds and pensions funds, she added, “are withdrawing their capital from oil and gas companies on the grounds that quicker-than-expected growth in clean energy and associated regulation is making oil and gas business models highly vulnerable. This announcement will put pressure on investors to ramp up their engagement with integrated oil majors ahead of [annual general meeting] season” when stock holders gather to assess and review company performance and strategies.

While the financial reality of the climate crisis comes into increasing view for global investors and markets, 350.org says that credit belongs to the campaigners from around the world who have bravely stood up to demand an end to the financial and energy hegemony of the fossil fuel industry.

At the heart of the global divestment campaign, the group said, “is a people-powered grassroots movement—it’s ordinary people pushing their local institutions to take a stand against the fossil fuel industry —the industry most responsible for the current climate crisis.”

Climate Change, a clear risk and danger for investments

Climate Change, a clear risk and danger for investments

Gulf Times of Qatar in this ViewPoint dated February 26, 2019, elaborates on Climate Change, a clear risk and danger for investments that are not only increasingly apparent to all but very obvious especially where it hurts the most.

Climate risks pose a clear and present danger for investors

ViewPoint: Image processed by CodeCarvings Piczard ### FREE Community Edition ### on 2018-03-05 22:14:26Z | |

Extreme weather events are the most threatening global risks this year, the World Economic Forum warned last month.
The financial sector has for long worried that a crisis could shape up from growing climate risks. And insurers are increasingly concerned that rising temperatures will lead to a slump in property values that could spark broader financial turmoil.
In a report published last week, ClimateWise, a group run out of the University of Cambridge including some of the world’s biggest insurers, said increasing catastrophes linked to climate change could triple losses on property investments over the next 30 years.
The warning adds to concerns raised by Munich Re last month, which said a string of floods, fires and violent storms had doubled the normal amount of insurable losses. Munich Re said global climate-related losses may have topped a record $140bn last year, adding investors should look again at whether they’ve properly accounted for rising damages from weather catastrophes.
The German insurer reported $160bn of losses from natural catastrophes last year, some $20bn above inflation-adjusted averages in the previous three decades.
Wildfires in California have just caused a corporate casualty of climate change with utility PG&E Corp collapsing due to liability from two years of fires. 
When PG&E filed for Chapter 11 on January 29, it marked not just one of the largest utility bankruptcies in history; it’s also one of the first tied to climate change. 
PG&E, owner of California’s largest electric utility, made the move after estimating that it faced a $30bn liability from wildfires whose intensity has been blamed by state officials on worsening droughts linked to global warming. 
There are growing signs that global warming is causing noticeable dents in some of the world’s largest and most sophisticated economies.
A protracted drought in Germany that made crucial waterways impassable to ships shaved around 2 percentage points off growth in Europe’s largest economy in the fourth quarter of 2018. 
The US Defence Department last month warned climate change could compromise US security, with rising seas increasing flood risk to military bases and drought-fuelled wildfires endangering those inland. 
In December, the Bank of England said it would force banks to make better preparations for climate change after finding only a few had done so.
Make no mistake, the overheating planet is bad for the economy. 
Rising temperatures could curtail the pace of US economic growth by as much as one-third by 2100, according to research from the Federal Reserve Bank of Richmond in mid-2018. 
The climate impact could be disproportionately damaging to developing economies.
The world’s 100 poorest countries could be 5% worse off by the end of the century with climate change – wiping trillions of dollars from the global economy every year – according to research findings by the University of Sussex and La Sapienza economists in early 2018.
For sure, a collective global effort to enact stricter carbon emissions policies is a must to deal with global warming concerns. For the financial sector, not only should investors price in climate risks; but they need to incorporate scientists’ climate projections into their own catastrophe models.