Why Brazil's megadrought is a Wall Street failure

Amy Larkin in the Guardian (UK): It’s hard to overestimate the appalling environmental and economic crisis that’s brewing in Brazil right now. The country is in the grip of a crippling megadrought – the result of pollution, deforestation and climate change – that deeply threatens its economy, society and environment. And the damage may be permanent: São Paulo, Brazil’s largest city and industrial center, has begun rationing water and is discussing whether or not it will need to depopulate in the near future.

But if Brazil’s drought is shocking, Wall Street’s shortsighted approach to the country is appalling. Institutional investors’ reports on the country – the seventh largest economy in the world – cite worries about inflation, government cutbacks and low consumer confidence. But I could not find a single analysis that mentioned the existential threat facing the country: the megadrought that is expected to last decades and could destroy the Brazilian economy. Not a single analysis cited the brutal global impact that this will cause.

In other words, a host of institutional investors have found worrisome things to say about Brazil, but none seem to be aware of – or, at least, willing to face – the country’s greatest threat. Attempting to separate economies from environment – as many of these analysts seem to do – is like trying to separate mind and body. It simply doesn’t work.

We will never repair our business models and government policies to conform to the real environmental constraints of the 21st century until we repair this fundamental flaw in our economic system. Investors and analysts regularly review a host of factors – including national debt, inflation, currency devaluation and other financial considerations – when they formulate their economic predictions. Their decision to omit the environment as a fundamental economic consideration is willfully ignorant and negligent....

A dried up reservoir in Paraguacu, Brazil, from 2012, shot by WOtP, Wikimedia Commons, under the Creative Commons Attribution-Share Alike 3.0 Unported license

Adapting to climate change can’t be left to the wild west of the markets

Razmig Keucheyan in the Guardian (UK): ......This fiscal crisis of the state will weigh not only on reaction and adaptation to climate events, but on mitigation policies. Cutting greenhouse gas emissions implies an energetic transition on a massive scale towards clean energies. This requires investments by the state, which will be difficult given the already overstretched public finances. Rising debt levels inflicted on societies by neoliberal tax cuts for the rich gravely compromise our capacity to adapt to climate change.

So far, so good. But then the IPCC report takes a final step – in the wrong direction. To bridge the gap in public finances caused by recurrent extreme weather events, it recommends appealing to private investors. More precisely, it advocates the implementation of financial instruments such as catastrophe bonds or microinsurance as a means to lighten the burden on the state in the face of a changing climate. Where the state does not have the resources to act, financial markets should take charge.

This financialisation of adaptation was already encouraged, in the years preceding the release of the IPCC report, by organisations such as the World Bank and the OECD. Thus, a 2012 working paper published by the OECD spoke of the need to “immunise public finances” from the effects of climate change, by issuing so-called “sovereign” catastrophe bonds, ie catastrophe bonds issued by states.

Financialising adaptation is a bad idea for numerous reasons. Here are two. Firstly, finance is prone to crisis, as the subprime market’s collapse demonstrated in 2007. Thus, financialising adaptation would put adaptation policies – parts of them at least – at the mercy of the erratic behaviour of financial markets. Adding financial instability to environmental instability will only increase the scale of disasters. What is needed, on the contrary, is less reliance on the logic of markets, and more environmental long-term planning.

Secondly, finance is in its essence undemocratic, ie out of the control of democratic deliberation. It is a form not only of economic dispossession, but of political dispossession, where the few choose for the many.

Adaptation to climate change, however, will require the involvement of the people, the deepening of the democratic process, and even the invention of new democratic institutions. Without their active commitment, their knowledge and knowhow, it is doomed to fail. The reason for this is that adaptation will in a good part be a matter of reorganising the daily lives of the people, and that this will obviously not be done without them. Adaptation to climate change, from this perspective, may well be our chance to revitalise democracy “from below”...

Panic at the New York Stock Exchange in 1893

Australian environmentalists welcome bank wariness on reef port

PhysOrg: Environmentalists on Saturday welcomed Deutsche Bank's reluctance to invest in a major port expansion near Australia's Great Barrier Reef, saying it reflected global concern about the project. Australia gave the green light to the major coal port expansion for India's Adani Group at Abbot Point on the Great Barrier Reef coast last year subject to strict environmental conditions.

But conservationists slammed the approval, warning it would hasten the natural wonder's demise given it is under pressure from climate change, land-based pollution and crown-of-thorn starfish outbreaks. At its annual general meeting in Europe on Friday, Deutsche Bank said its policy for dealing with activities in or near World Heritage Sites ruled it out of investing in Abbot Point.

"Deutsche Bank does not support activities when the government and UNESCO do not agree that the planned activities do not place the exceptional universal value of the site at risk," the bank said. "As we have seen, there is currently no consensus between UNESCO and the Australian government regarding the expansion of Abbot Point in the vicinity of the Great Barrier Reef. Our policy requires such a consensus at the least. We therefore would not consider applications for the financing of an expansion any further."

UNESCO has stated concerns about coastal development proposed in the region including port and coal operations, with the body expected to discuss the issue at a meeting in June.

The Australian Marine Conservation Society, which is campaigning against the port expansion, welcomed Deutsche Bank's stance, which it said showed global concern about plans to "industrialise the coastline of the Great Barrier Reef"...

Helicopter view of the Great Barrier Reef, shot by Nickj, Wikimedia Commons, licenseed under Creative Commons 3.0 

Climate finance: where is the missing data?

Mark Fulton in the Finance Hub at the Guardian (UK): Money makes the world go round, as they say, but it's crucial to know exactly where it's coming from and where it's going to understand whether finance is achieving climate goals, and how.

I am talking about the flow of funds that traces which institutions (the sources) are investing in which assets (the uses). Simply put, we need to know who has the money and where they are putting it to work out why, and what drives their investment.

There are three key areas of climate and clean energy finance where a flow of funds would be particularly useful: renewable energy markets, energy efficiency finance and climate finance for the developing world. The latter of thesecould be tied to the $100bn (£75bn) United Nations Framework on Climate Change target for capital flows from developed to developing countries, and certainly will be a focus of the Green Climate Fund. In all cases, it is useful to know the global, regional and country level breakdown of the data.

...Key data is already available from organisations such as the International Energy Agency, Bloomberg New Energy Finance, UNEP FI, thinktanks IRENA and REN21, and the Climate Policy Initiative, among others. But the underlying sources of these funds are much harder to find. It would be valuable to know the sources by type of institution, particularly pension funds, insurance companies and corporations in the private sector.

The most frequently asked question is whether institutional investors are deploying much of their $70tn plus funds in environmental markets. If the private sector is to meet the challenge of investing the trillions of dollars needed to meet climate goals, it is obvious that substantial flows need to originate from private sector investors.

While there is data on sources at a project level, it is not comprehensive. It's only a snapshot at the time of financing and does not show the ultimate underlying holders of the assets. This becomes a complex calculation as capital feeds into various vehicles (holding the assets) that are then seen as the source of capital. But finding out who ultimately is responsible for funding those vehicles – the true sources – is not easy....

The diagrams above are just for illustration. The transition from normal (healthy) market behavior into abnormal seizure-like behavior at the end of 2001 (the vertical dashed line). Top is the S&P Index from March 7 2000 until March 22 2011. The third panel shows the stock correlations and the second panel shows the partial correlations (the correlations after subtraction of the Index effect. The decrease in the partial correlations manifests the abnormal dominance of the Index. This effect is further pronounced when looking at the Index Cohesive Force – the ratio between the stock correlations and the partial correlations, shown at the bottom panel.  Created by Sharronzabary, Wikimedia Commons, under the Creative Commons Attribution-Share Alike 3.0 Unported license

Where are the climate change investments? A Carbon Based Original

    Markets can fall prey to inefficiencies or fail altogether. The annals of investment are replete with tales of visionary investors who find ways to exploit these failures.      Climate change, in addition to being a global emergency, is also a market failure.  In the words of climate economist Nicholas Stern in 2007, "Climate change is the greatest market failure the world has ever seen, and it interacts with other market imperfections."

    So where are the investors who are profiting from exploiting this failure?  In fact, their numbers are small, and so far their performance has not attracted other asset managers. 

    One disadvantages is that investors in climate change do not have need politicians committed to the right policies.  As Stern put it, "The first is the pricing of carbon, implemented through tax, trading or regulation. The second is policy to support innovation and the deployment of low-carbon technologies. And the third is action to remove barriers to energy efficiency, and to inform, educate and persuade individuals about what they can do to respond to climate change."

    Investments in the right actions face a political headwind. Instead of a concerted three-pronged push, would-be climate investors face virulent obstruction from conservative politicians.   These politicians and their fossil fuel backers work indefatigably to thwart all measures to price carbon. They do their utmost to thwart any large-scale post-carbon investing -- witness the near-criminalization of renewable energy at the hands of congressional Republicans.  They spout fossil fuel propaganda unabated even though governments and businesses pursue hundreds of small improvements in energy efficiency, and a majority of Americans believe climate change is real.

    Hostility from politicians and lobbyists is not the only obstacle. Psychology and cognitive habits place another barrier in the way of investing profitably in climate change action.

    Most people rarely notice long-term, lumbering problems for a number of cognitive and psychological reasons.  Their time horizon is too short. The climate signal emerges too slowly from the noise to command investors' attention.

    Traders, for example, operate in the briefest of short runs, and for them, climate change has hardly any existence at all. They buy securities, hold them for just a moment. 

    Investors work with a time horizon of three months to a year.  But even this somewhat longer field of view is the blink of the climate's eye. 

    Some asset managers defy this tendency, focusing on climate and renewable energy as investments, but most other investors quickly lose interest. 

    The time horizon problem even bedevils insurance, the one industry that cares the most about climate change right now.  Insurers have an immediate and obvious stake in reducing climate risk, since clients' disaster losses determine how profitable they are. 

    A growing number of property and casualty firms are focused on climate change. They are cutting their own emissions, taking climate into consideration in their portfolios, spelling out and communicating the risks of climate change, and even trying to influence policy. 

    Does this mean we should put our money in climate-savvy insurers?  Sometimes the industry does well, but the nature of the risk business prevents them from reaping extravagant payoffs. 

    The time horizon of insurers is one year -- policies are renewed every twelve months, usually in January.  Their judgment of their portfolios' risks only needs to be correct enough for a year. 

    Skill at assessing risk is only one part of the insurance business. The other half is investing. Insurers invest the premiums they take in, resulting in some of the largest asset pools in the world.  Their bias is conservative and short-term, since they might face large losses that could force them to unwind their portfolio in a hurry. In short, an insurer that has an acute understanding of climate risks has a better chance for staying in business, but it won't perform like a boom stock.

    Between the difficulty of thinking long term and fierce political opposition, sound climate investing has languished. That's alarming because all of us have a stake in stopping greenhouse gas emissions and reducing the harshness of its impacts. It should be profitable to do so.

Dunes at Gran Canaria, shot by Marc Ryckaert (MJJR), Wikimedia Commons, under the Creative Commons Attribution 3.0 Unported license

Ignoring natural capital could see countries' credit ratings downgraded

Will Nichols in Business Green: Degradation of a country's so-called natural capital could exacerbate the sovereign debt crises that have helped trigger, and deepen, the global economic downturn, the UN warned yesterday. A report by the UN Environment Programme's Finance Initiative (UNEP FI) says loss of soils, forests, and fisheries, as well as rising resource costs, are likely to become increasingly important to a nation's economic health – and may therefore affect its ability to repay or refinance sovereign debt.

However, despite the US, Spain, Italy and Greece all seeing their sovereign debt downgraded since 2011, environmental factors are still being overlooked by the models used to determine sovereign credit ratings.

The UN's analysis of France, Japan, India, Turkey and Brazil found all five countries are pushing their ecological assets to the limit and lowering their resilience to natural resources risks, such as spikes in commodity prices.

India, for example, is currently demanding almost twice as much from its ecological assets than they can sustainably provide, and this gap is growing. The report argues that population growth means an increasing amount of the country's natural resource requirements will have to be met through imports. As such, the country's ability to cope with commodity price shocks will continue to diminish, potentially undermining its credit-rating.

Meanwhile, France is sweating its natural resources at a level 1.4 times that which can be sustainably provided and Japan could only meet 35 per cent of its natural resource needs domestically in 2008, down from 73 per cent in 1961....

Mount Fuji and cherry blossoms, shot by Midori, Wikimedia Commons, under the Creative Commons Attribution 3.0 Unported license

Investment opportunities and risks resulting from global drought

Dubai Chronicle: The ongoing drought is the worst in the United States since at least 1956, with 63 percent of the lower 48 states suffering drought conditions at the end of August. While conditions are far from those in the Dust Bowl years of the 1930s, drought conditions are the new normal, according to “Global Drought – Opportunities and Risks,” a new BofA Merrill Lynch Global Research report. It follows thematic megatrend reports from BofA Merrill Lynch Global Research on obesity, energy efficiency, safety and security and water.

The U.S. and global drought underscores increased long-term challenges to global food, water and energy security, as demand for food and energy each are expected to climb 50 percent by 2030 with the demand for water growing by 40 percent over the same period, potentially creating a perfect storm of interlinked challenges.

These changing conditions pose a range of opportunities and risks for investors. For investors interested in the themes of fighting drought and in promoting food, water and energy security, Bank of America Merrill Lynch has introduced a screen that identifies liquid stocks exposed to global drought-related themes under the Bloomberg ticker MLEIARID. The stocks included in the screen are those that it considers to be long-term solution providers in such areas as water, fertilizers, crop science, energy efficiency, second-generation biofuels and renewables.

“The severity of the global drought underscores the long-term challenges for national and global economies,” said Sarbjit Nahal, equity strategist with the Bank of America Merrill Lynch Global Research ESG (Environment, Social and Governance) and Sustainability Team and a co-author of the report. “Food, water and energy security are increasingly bigger issues, and as governments, businesses and other players struggle to adapt to and mitigate drought conditions, there will be an evolving set of opportunities and risks for investors.”...

A dry stream channel during drought conditions, North Platte River in Goshen County, Wyoming, near Wyoming-Nebraska state line, shot by Kirk Miller of the US Geological Survey, public domain

Brazil's economists predict 'huge' growth of carbon markets

Jessica Shankleman in Business Green: Brazil's new carbon market could experience "huge" growth in the next eight years, as the government seeks to curb emissions from deforestation and industry. That is the bullish prediction of some of Brazil’s leading economists, who are also looking to the UK for advice in developing a successful emissions trading scheme.

Speaking to reporters at Sao Paulo's FGV school of economics, Mario Monzoni, founder and director of sustainability studies, predicted a cap-and-trade scheme would be the most important mechanism to cut emissions from deforestation.

"We spend most of our days talking about cap and trade in Brazil," he said. "We need some conditions to do it, such as carbon inventories, which help to create the demand for credits. Nobody wants to be on the demand side. Everybody wants to sell. If there's no demand there'll be no market. But I believe in the next eight years in Brazil, we're going to develop a huge cap-and-trade market for carbon."

Deforestation currently accounts for around 80 per cent of Brazil's greenhouse gas emissions, driven by the growth of agri-businesses including cattle farming, soya bean and sugar cane. Brazil's first government-backed carbon trading scheme, Bolsa Verde do Rio de Janeiro (BVRio), was launched in December last year. Last week it opened pre-registrations for a new forestry credit market, which can be used by farmers to comply with the country's Forestry Code....

Atlantic Forest in 1976, “Pico do Paraná”, “Serra do Mar”, coast of the Parana State, Brazil, shot by Ângelo Antônio Leithold, Wikimedia Commons, under the Creative Commons Attribution-Share Alike 3.0 Unported license

Carbon ‘like Titanic’ sinking on EU permit glut

Ewa Krukowska in Bloomberg: The plunge in European Union carbon permits is putting prices on course for their longest-ever decline and shows no sign of ending as member states wrangle over curbing a glut in the market.

EU allowances for December fell 5.2 percent this year, extending a streak of quarterly losses stretching back to March 2011. Prices may drop a further 50 percent and lawmakers will probably fail to cut supply in the world’s largest emissions market through a so-called set-aside process, according to UBS AG. For First Climate AG, an asset manager that advises the European Investment Bank’s carbon funds, emissions are unlikely to recover in the next quarter.

“Unless EU governments come up with a surprise decision to strongly support the set-aside or ambitious mid-term emission- reduction targets, I don’t see prices moving up much over the coming months,” Tuomas Rautanen, head of regulatory affairs and consulting at First Climate in Zurich, said by e-mail.

A surplus of permits and the inability of European nations to agree how to tackle the glut in the $120 billion market sent prices to an all-time low this year. Verified emissions data due on April 2 may show 2011 discharges from more than 12,000 factories and power plants in the region’s trading system fell short of the number of issued-and-sold permits for a third year, according to Bloomberg New Energy Finance...

Why investors need to act on climate change in 2012

Paul Simpson of the Carbon Disclosure Project in the Guardian (UK): As the dust settles on the COP17 agreement in Durban, two things are clear. Firstly, that government action to address climate change has not kept up with the pace and scale required to avoid dangerous climate change, therefore significantly increasing risk for society, businesses and the economy at large. Secondly, that although any future agreement may be too late to keep us below the 2C warming previously agreed as the safe target, it is likely that by 2020 all the world's governments, including the emerging markets, will agree a plan to reduce emissions.

This presents long-term investors such as pension funds with a challenging quandary. The slow progress towards action presents additional risks to their portfolio in the medium to long term from increasing frequency and severity of extreme weather events.

The Intergovernmental Panel on Climate Change (IPCC) has long described investors as aggregators of risk from climate change. It can be argued that if governments fail to act sufficiently then investors have to do so in order to protect their assets.

There is another significant risk building up in portfolios – when governments do finally agree a new legally binding climate change deal they will need to ensure that emissions reductions are made fast. This will therefore increase risks, such as stranded assets, to companies who have not transformed their business to decouple emissions from business growth....

The floor of the New York Stock Exchange in 1963

Rush for land a wake-up call for poorer countries, report says

Claire Provost in the Guardian (UK): Population growth, the increasing consumption of a global elite, and an international legal system skewed in favour of largescale investors are fuelling a worldwide rush for land that is unfolding faster than previously thought and is likely to continue, according to the largest study of international land deals to date.

Researchers estimate that more than 200m hectares of land – over eight times the size of the UK – have been sold or leased between 2000 and 2010. But although the food price crisis of 2007-08 may have triggered a boom in international land deals, the study argues that a much broader set of factors – linked to population growth and the rise of emerging economies – is raising the prospect of "a new era in the struggle for, and control over, land in many areas of the global south".

Forty civil society and research groups fed into the global commercial pressures on land research project, co-ordinated by the International Land Coalition (ILC), which draws on a decade of data to identify and analyse trends in large land acquisitions, and highlights the role of governments in brokering deals that may marginalise rural communities and jeopardise the future of family farming in favour of big industrial projects. This is the most comprehensive study to date of international land deals, pulling together findings from investigations around the world.

...Data collected by researchers show that around 40% of land acquired over the last decade is intended for biofuel production. In comparison, 25% is for food crops and another 27% for mining, tourism, industry and forestry. But the focus of land deals also varies by region: In Africa, 66% of land deals cross-referenced by researchers are intended for biofuel production, compared with 15% for food crops. Meanwhile, food production seems more significant in Latin America (27%), along with mineral extraction (23%)....

A communal rubber plantation near Benin City, Nigeria, in 1911

Forest-dependent communities lobby for end of REDD+

Kristin Palitza in IPS: Organisations working with indigenous peoples living in forests say the United Nations programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries (REDD+) is just another way for big corporates to reap huge profits.

REDD+ has been touted as a global scheme to conserve forests, enhance carbon stocks and support sustainable forest management. It is a system where you pour a lot of money into forests that will attract powerful international investors who will make big profits," warned Simone Lovera, managing director of the Global Forest Coalition, a worldwide network of more than 50 non-governmental organisations and Indigenous Peoples’ Organisations based in Amsterdam, Netherlands. She spoke during the U.N. 17th Conference of the Parties (COP 17), which is taking place in Durban, South Africa, from Nov. 28 to Dec. 9.

Lovera does not contest that deforestation and forest degradation are key climate change culprits. Caused by agricultural expansion, conversion to pastureland, infrastructure development or destructive logging, they account for nearly 20 percent of global greenhouse gas emissions, according to the U.N., more than the entire global transportation sector and second only to the energy sector.

REDD+ is supposed to turn this around. Since it was started in 2005, the programme enables industrialised countries in the North to reward reductions of carbon emissions to nations in the South. It is basically a system of performance-based payments that are financed through global carbon markets. The U.N. predicts that finance for greenhouse gas emission reductions from REDD+ could reach up to 30 billion dollars per year. The money is supposed to go towards pro-poor development, help conserve biodiversity and secure vital ecosystem services.

But indigenous communities say this is not so. It was big, international forestry businesses that ultimately benefited from the carbon deals, not the locals who have lived in and off the forests for many generations. Instead, locals are kicked off their land to make space for large monoculture plantations aimed at offsetting carbon emissions in the north...

Deforestation in the Atlantic Forest near Rio de Janeiro. This hill was clear-cut to use its clay in civil construction in Barra da Tijuca. Many trucks with the city public service logo worked on the hill's destruction, according to the photographer, Alex Rio Brazil

Climate forum hears of investment interest in Arctic

Having wrecked the world's economy as whole, the titans of finance are turning their attention to the Arctic. Pat Forgey in the Juneau Empire (Alaska) has the story: A major hedge fund manager is developing a new Arctic investment fund to take advantage of moneymaking opportunities in an increasingly ice-free Arctic, a climate change conference was told Saturday. That could help bring needed infrastructure development to the region said Alice Rogoff, publisher of the AlaskaDispatch.com website.

Rogoff spoke to the Juneau World Affairs Council’s “Politics of Global Climate Change” forum that concluded Saturday at the University of Alaska Southeast. Rogoff said Alaska needs to be ready to capitalize on the Arctic’s new investment interest, and wants the state ready to attract some of that new investment in places where it wants and needs the development.

“What is good development, and how can it come about in some sort of orderly way,” she said. The Arctic investment fund that Rogoff revealed will be managed by Guggenheim Partners, a firm with $125 billion in assets under management.

She said the investment interest by Guggenheim Partners of billions in the Arctic was “huge news” that would merit a big headline in the Wall Street Journal — if it knew about it....

Prudhoe Bay oil fields in 1971, US Fish and Wildlife Service

Climate change not factored into companies' value, warns UN chief

Fiona Harvey in the Guardian: Companies around the world are being valued incorrectly by world stock markets, because the cost of their exposure to climate change is not being factored in, the United Nations' climate chief has warned.

"As long as these companies [that emit large quantities of greenhouse gases] have a high value, we are giving out the wrong signals," said Christiana Figueres, executive secretary of the UN framework convention on climate change, told an audience of carbon finance specialists in London. "It has got to be that those companies that are investing in the technologies of the future are recognised."

She called for "an active valuation" of companies with high carbon emissions, saying the world was "far behind" in doing so. "How is it possible that the valuation is not keeping pace?"

Companies should take note, she urged, of the political reality that governments around the world have signed up to a commitment of holding global temperature rises to no more than 2C above pre-industrial levels, which scientists regard as the limit of safety beyond which climate change becomes unstoppable and catastrophic.

If businesses were to pay attention to the political commitment that countries signed up to in Copenhagen in 2009 and last year in Cancun, they would behave differently, she suggested. "We are moving to a low-carbon future – businesses need to understand that signal. This is a megatrend."...

Smokestacks in Champaign, Illinois, shot by Dori, Wikimedia Commons, under the Creative Commons Attribution-Share Alike 3.0 United States license

Who's most at risk from climate?

Giles Parkinson in Climate Spectator (Australia): The extraordinary volatility in financial markets over the last few months and years has led many of the world’s leading funds managers to make a fundamental reassessment of risk and opportunity – driven by the rising stress in resource availability, high commodity prices and, of course, soaring debt levels.

A new report by HSBC says these stresses are likely to be multiplied in coming years by the climate factor and need to be taken into account by investment managers and business strategists, particularly as the world seems less capable of limiting global warming to the targeted 2°C. “This is not a distant threat but a present reality,” the bank says, noting the slump in food yields, changes in water availability and the cost of extreme weather events. “Uncertainty surrounding the scale and speed of future impacts mean that climate, food, energy and water risks need to be factored in.”

To help make those assessments, and decide where investment decisions should be directed, the bank has assessed the climate vulnerability of the G-20 countries in terms of their exposure and sensitivity to climate change and its impacts on people, the environment, and key resources such as water, food and energy; as well as their ability and capacity to adapt.

The most vulnerable countries were considered to be India, Indonesia, China, Saudi Arabia and Brazil. The significance of these countries is that they are expected to account for more than one third of global output by 2050. For those making long-term business and investment decisions, HSBC says, “the time for integrating the climate factor has arrived.”...

Food prices to soar up to 180% as supplies tighten

Agrimoney.com: Prices of agricultural commodity prices are to soar by up to 180% by 2030, unless governments take action to tackle the squeeze on food supplies presented by climate change and a growing world population.

The change in the world weather patterns, reflecting rising levels of greenhouse gases, "will have adverse effects" on both yields and output "across all developing regions", including some of the largest agricultural producing countries, Oxfam said. "Climate change poses a grave threat to food production," the charity said, citing dangers to underlying yields and of droughts and floods "which can wipe out harvests at a stroke".

Estimates suggested that rice yields may fall by 10% for every rise of 1 degree Celsius in minimum temperatures during growing countries' dry season, with potentially "catastrophic" declines in yields in sub-Saharan Africa.

Corn productivity was poised to fall 35% short of potential in 2030 in South Africa, which remains a significant exporter of the grain, if overtaken by many Latin American countries. Climate change poses a threat to these countries too, including Brazil, where wheat output will fall 20% below where it would be in 2030.

In rice, China, the world's largest producer, will lose 9% of its potential to the changes in the weather patterns evident in the "climate chaos" which has sent the world "stumbling into our second food price crisis in three years"….

A farmer tends rice fields in China, shot by Markus Raab, Wikimedia Commons, under the Creative Commons Attribution-Share Alike 2.5 Generic license

World Bank calibrating its measurement of sustainability

Emilio Godoy in IPS (Tierramérica) reports on a World Bank effort to actually the monitor the impacts of the projects that it backs: The World Bank is working to update the mechanisms it uses to measure the effects of the financing it provides, particularly in environmental and social terms, now that it is gearing up to administer the new Green Climate Fund. "The Bank is working to deepen the measurement of impacts," not only "the outcomes associated with a project, but also its long-term effects, such as impacts on health, ecosystems or the quality of life of the population," Gustavo Saltiel, the director of sustainable development for the World Bank in Mexico, told Tierramérica.

The World Bank is one of the leading financers of environmental projects in Mexico, as well as projects to combat climate change since 2009. Since 1999, the multilateral institution has disbursed 672 million dollars in loans for 43 projects in Mexico aimed at developing the low-carbon economy, energy efficiency, renewable energies, sustainable transportation, and improved air quality.

But the results of these projects and the transparency with which these funds are used by the Mexican authorities have been questioned by civil society organisations.

The World Bank has established safeguard policies to "promote socially and environmentally sustainable approaches to development as well as to ensure that Bank operations do not harm people and the environment," according to its website.

These safeguard policies include the Bank's policy on environmental assessment of loan proposals and the corresponding safeguards regarding cultural property, disputed areas, forestry, indigenous peoples, international waterways, involuntary resettlement, natural habitats, pest management and safety of dams.

Evaluations of these policies "have demonstrated the poor work done (by the Bank) in monitoring the execution of measures to mitigate social and environmental risks," Vince McElhinny of the non-governmental Bank Information Center, based in Washington, told Tierramérica….

Marginalized settlement "Colinas del Río", in the municipality Benito Juárez of the State of Nuevo León in Mexico. December of 2005. Photography taken by LeCire

Food insecurity means few would mourn the death of Doha

Jayati Ghosh in the PovertyMatters blog, from the Guardian (UK): Officials at the WTO and leaders of several governments have launched what is said to be a "last-ditch effort" to save the Doha development round of trade negotiations from what is seen as imminent collapse. Will it collapse? And does it matter if it does? Or in other words, what is the likelihood of such a deal, and how much would it benefit developing countries? The brief answers are: low and very little.

So far, the finger-pointing for the failure has been directed either at the US (in which domestic politics suggests little appetite for external trade negotiations), or the newly significant large emerging economies such as China, Brazil and India (that are less willing to accept what are seen as unequal terms), or the overall impact of the "Great Recession" (which has made more countries wary of trade openness that could undermine domestic production and employment).

One aspect that is less talked about is the impact of the WTO Agreement on agriculture and food security in the developing world. The apathy or even downright cynicism in such quarters towards a new trade deal can be understood if we examine this. Basically, many developing countries are now more food-insecure than ever before, and at least part of that can be related to recent trade patterns.

Global food prices have been very volatile over the past four years. They rose rapidly from early 2007, reached a peak in June 2008, then declined only to increase again from early 2009. In December 2010 the FAO food price index crossed its previous peak. In March 2011 food prices were on average around 37% higher than a year earlier, while cereal prices were 60% higher. Similar patterns are evident in global fuel markets, which have been further roiled by the unrest in the Middle East….

Manage coastal erosion through 'conservation credits'

Luke Walsh in edie.net: A stretch of Suffolk and Essex coastline could be transformed into grazing and sea marches as part of a managed way to tackle rising sea levels. Plans put forward by the Environment Bank and Environment Agency would see businesses pay to offset their green impacts, with the funding used to manage coastal areas.

For the past four years, the Environment Bank has been refining a delivery model for the UK in consultation with central government, NGO's, developers, landowners, farmers and local authorities. Now the Shell Foundation has agreed to provide funding and internal expertise for the next year to allow a trial scheme to go-ahead.

…The scheme will in effect create a new market mechanism to enable sea levels to rise in a managed way, with the current site serving as a pilot. Environment Bank chairman, David Hill, said: "Creating markets for ecosystem goods and services should stop the environment being treated as a non-replenishing extractive industry.

"The model we have developed, together with the trading infrastructure we are constructing, will be capable of listing, registering and validating credits in respect of the full range of emerging markets for ecosystem services."…

Suffolk coast and Heaths Path, shot by Keith Evans, Wikimedia Commons, under the Creative Commons Attribution-Share Alike 2.0 Generic license

New Deutsche Bank report: 'Investing in Climate Change 2011'

Deutsche Bank Asset Management: A DB Climate Change Advisors (DBCCA) report released today, "Investing in Climate Change 2011", examines the risks associated with climate change investing across different asset classes and provides a framework to understand how asset managers can manage these risks. In the report, DBCCA argues that a major shift in investor attitudes is taking place: leading institutional investors around the world to undertake this analysis because of a growing realization of the potentially profound impact climate change may have on their existing portfolios.

"Institutional investors are giving greater consideration than ever before to climate change in their assessment of asset allocation," said Kevin Parker, Global Head of Deutsche Bank's Asset Management division (DeAM) and a member of Deutsche Bank's Group Executive Committee. "I believe that we have reached a critical point in our industry at which all the talk about climate change begins to translate into action. Asset owners everywhere are starting to move and naturally their first impulse is to identify where in their portfolios the climate risk lies. To do so effectively and efficiently, they need a new intellectual framework and set of tools. And they need them now."

The report, DBCCA's fourth annual review of the climate change investment market, points out that 2010 was the largest year on record for investment in clean energy and globally, the investment opportunity steadily continues to improve.

…The report identifies eight key trends which will influence investors' capital allocations over the next year:

• The climate change megatrend persists.
• A more sophisticated exploration of climate change risk within portfolios.
• Policy is a key driver for cleaner energy.
• The ambitious scale, scope and commitment of Chinese leadership will foment structural change in clean technologies.
• Investors will look to US state projects rather than projects driven by Federal policy.
• Natural gas as a lower-emission transition fuel in the US.
• The risk-return profile in the climate change sector varies between asset classes.
• Global policy makers recognize the need for more in-depth dialogue to explore how public and private partnerships can support renewable energy scale-up in developing countries.

Victor Korniyenko created this global map of average temperature change, with a time frame of either "2000-2009" or "1950-1980". Wikimedia Commons, under the Creative CommonsAttribution-Share Alike 3.0 Unported license