Cash aid feeds business surge in northeast Kenya

Isaiah Esipisu in Thomson Reuters Foundation: When the government of Kenya began giving cash instead of food aid to poor people in Kenya's drought-stricken North Eastern region, the aim was to help them buy food more efficiently and conveniently.

But the cash-transfer programme has had an unexpected effect: Most of the recipients of the cash have used it to start small businesses, which they see as the best way of adapting to increasingly tough climatic conditions.

"We expected them to buy food, given the emergency situation. But investing the money into businesses shows how very little resources can be used to build resilience among very poor communities," said Evelyn Nadio, manager of the Hunger Safety Net Programme (HSNP), which provides the cash aid under Kenya's National Drought Management Authority.

The parched, acacia scrub regions receiving the help - including Kenya's Mandera, Turkana, Marsabit and Wajir counties - had seen huge losses of livestock as a result of drought. Many herders had lost nearly all their animals, which had been their main source of income. Today, however, eight years after the programme began, other businesses have sprung up.

At Katiko Market in Turkana Central, Akuom Idieya Katurong'ot, a widowed mother of seven, runs a retail shop and a goat slaughterhouse. She also rents a set of small kiosks built from iron sheeting. Money from the cash-transfer programme helped pay for all the new infrastructure.

Nearly 90 percent of the recipients of cash from the safety net programme have similarly opened retail businesses or used the money to restock their herds with drought-hardy goats, said Nadio....

A roadside market in Kenya, shot by Angela Sevin, Wikimedia Commons via Flickr, under the Creative Commons Attribution 2.0 Generic license

UNEP urges Africa to invest in climate change adaptation

APA in StarAfrica: Investment in climate change adaptation can help ensure that the impacts of climate change do not reverse decades of development progress in Africa, according to a new report by the United Nations Environment Programme (UNEP).The report released in the Kenyan capital Nairobi on Tuesday claims the adoption of climate change practices will reverse a projected 20 – 50 per cent decline in water availability.

The report titled "Keeping Track of Adaptation Actions in Africa:  Targeted Fiscal Stimulus Actions Making a Difference" is the first graphical account presenting practical examples of successful low-cost adaptation solutions from around sub-Saharan Africa in one concise handbook.

The report includes examples of successful adaptation projects that have provided the impetus for large-scale government investments and policy action. According to the report, by 2050 Africa’s population will have doubled. The continent will then be home to 2 billion people, the majority of which will still largely depend on agriculture for their livelihoods, it says.

"With 94 per cent of agriculture dependent on rainfall, the future impacts of climate change – including increased droughts, flooding, and seal-level rise – may reduce crop yields in some parts of Africa by 15 – 20 per cent," UN-Under-Secretary-General and UNEP Executive Director Achim Steiner adds....

The Sahara in Mauritania, shot by Annabel Symington, Wikimedia Commons via Flickr, under the Creative Commons Attribution 2.0 Generic license 

Fury over Senegal’s private land buyers

IRIN: ...A liberal land regime in Senegal over the decade has favoured large-scale acquisitions of arable land by both foreign and local investors. Dramatic changes in ownership have coincided with serious food shortages in the sub-region, a global financial crisis and a growing emphasis on the promotion of bio-fuel, with Senegal heavily promoting the planting of the controversial Jatropha tree, the seeds of which are used for the production of fuel for diesel engines.

Between 2000 and 2010, over 657,000 hectares of land, around 17 percent of Senegal’s arable land, was allocated to 17 private firms. Ten of the firms are Senegalese and the rest are foreign, according to the regional pressure group Pan-African Institute for Citizenship, Consumers and Development (CICODEV).

Under the previous administration of Abdoulaye Wade, the government pushed high profile schemes like the Return towards Agriculture plan (REVA) and the Grand Agricultural Drive for Food and Abundance (GOANA), with an emphasis on promoting agri-business and bio-fuels.

“These initiatives have led to a glut of private operators, including religious leaders and senior state officials moving in on land in rural areas,” complains Mariam Sow, coordinator of the Natural Protection Programme of international NGO ENDA.

In a May 2011 report, the Agricultural and Rural Prospective Initiative (IPAR), a sub-regional NGO which aims to provide “strategic analysis” of rural and agricultural issues, highlighted the volume of land deals in northern Senegal. IPAR drew particular attention to the case of Mbane in Saint Louis Region, where it said 232,000 hectares had been distributed to politicians, religious leaders and private operators with strong political connections under the GOANA project. The IPAR report noted that, at the time of writing, much of the land acquired had yet to be exploited....

A farm in Senegal, image by Richard Melo da Silva, public domain

Nordic development fund eyes new climate project

Katia Moskvitch in SciDev.net: The Nordic Development Fund (NDF) that helps facilitate climate change investments in developing countries has started discussing several new project ideas with the World Bank — as the small fund celebrates its 25th anniversary.

One is an initiative to mitigate coastal erosion affecting West African cities, a problem that climate change is expected to worsen, says Sari Söderström Feyzioğlu, sustainable development manager at the World Bank.

The NDF, a joint development finance institution of Denmark, Finland, Iceland, Norway and Sweden, helps the World Bank “add creative, cutting-edge climate change components to traditional lending and knowledge-generating projects”, she says. For example, the NDF will make it possible to “assess the robustness of future hydroelectric power investments in the face of climate change in the major [African] river basins,” says Feyzioğlu.

Another project under discussion is in Mozambique, she says, where the fund will support efforts to improve the governance of local, artisanal fisheries and transform fishing — a sector already facing habitat loss and degradation due to unsustai
nable use, and that climate change will further damage. The NDF was founded in 1989 to promote economic and social development by providing financing to developing countries. In May 2009, its aim became to provide financial support to developing countries on climate change issues.

It also works with partners such as the African Development Bank, the Asian Development Bank and the Inter-American Development Bank (IDB)....

Exxon Mobil to assess climate risk

Heather Long in CNN Money: Exxon Mobil (XOM), America's largest energy company, funded global warming denial groups for years. Now it has agreed to release a report by the end of March that details how climate change could affect its business.

The move comes in response to a shareholder resolution and as the nation marks the 25th anniversary of the Valdez oil spill that released 11 million gallons of crude oil into Prince William Sound in Alaska. Investors and activists concerned about climate change see this as a major victory that they hope will inspire other companies to follow suit.

The push to get Exxon Mobil to do a climate change assessment has been going on for months. Investors sent letters and tried to engage with Exxon behind the scenes. Arjuna Capital, a sustainable wealth management firm, and As You Sow, a California non-profit, ultimately filed a shareholder resolution demanding a comprehensive "carbon risk report." That resolution has been dropped now that Exxon plans to issue its climate change report.

The argument environmentally conscious investors have made is that shareholders need to know how large a company's fossil fuel reserves are. Regulatory or financial conditions may make it too costly to use all the current reserves, let alone new ones. "Shareholder value is at stake if companies are not prepared for a low-carbon scenario," said Natasha Lamb, director of equity research for Arjuna Capital....

Getting carbon out of your portfolio is tricky

Jonathan Fahey in ABC News via AP: If you are like millions of Americans and own a broad stock index fund, you own parts of Exxon Mobil, Peabody Energy and other companies that earn money selling oil, coal and other fossil fuels.

For some, that's great. Fossil fuels give us light, keep us warm, help grow our food, deliver our products and jet us around the planet. And companies such as Exxon, Chevron and Southern Co. are stable and profitable and offer consistent dividends that pad retirement accounts nicely. For others, however, profiting from companies that produce or burn fuels that pollute and contribute to climate change — and lobby against laws and regulations that would reduce emissions — is something they want no part of. Still others fear the share prices of fossil fuel companies are sure to plummet when society decides we can no longer burn the troves of hydrocarbons they own.

But while student groups around the country are calling for college endowments to stop investing in fossil fuel companies, and some religious groups have done already so, it's much trickier for individual investors.

Matt Patsky, chief executive of Trillium Asset Management, an investment adviser in Boston that has long helped endowments, religious organizations and wealthy families invest in socially-responsible ways, says that about a decade ago clients started asking the firm to create investment strategies that left out fossil fuel companies.

The firm, which manages $1.4 billion, now strips out investments in oil and gas companies, coal companies and utilities that generate electricity with mostly fossil fuels for these clients. The firm then adds shares of other companies that attempt to mirror the performance of these traditional energy companies. He says the firm has been able to generate returns as good or better than the broad market, though he says it is not possible to generate dividends quite as high as the total market....

Climate change adaptation investments are good for business

Natalie Tang at TriplePundit: Shared-value investments can increase much-needed climate change resiliency in the most vulnerable countries, according to top thought leaders from public and private sectors who met to discuss opportunities for innovation and resiliency at Norte Dame Adaptation Index’s (ND-GAIN) Annual Meeting held December 12, 2013 in Washington D.C.

The ND-GAIN Index annually ranks more than 175 countries based on their vulnerability to climate change and their readiness to adapt to natural disasters exacerbated by shifting weather patterns.  Their mission is to enhance the world’s understanding of the importance of adaptation and facilitate private and public investments in vulnerable communities.

According to this year’s data, which was released at the annual meeting, “it will take more than 100 years for the poorest countries to reach the readiness levels that the richest countries have already attained” stated Associate Professor Jessica Hellmann, who leads Norte Dame University’s climate adaptation program.  Hellmann posited that while countries are becoming more resilient, adaptation is not happening fast enough, in part due to a lack of investment.

...The ND-GAIN index is an open source, navigation tool to compare overall vulnerabilities of different countries and also specific metrics, such as infrastructure, health, or water, to get a better understanding of risks and opportunities as they relate to individual businesses. Despite the potential to prevent investments in already marginalized countries, Hersh hopes the information will instead open dialogue with governments and lead to partnerships to push for increased adaption strategies that will serve the needs of both parties....

Investing in Africa's regional infrastructure

James Leigland at GEGAfrica: Discussions in Group of 20 (G-20) meetings over the last several years have increasingly focused on the need for a huge scale-up in infrastructure investments in developing countries, particularly through large regional projects involving private sector participation.

The G-20 is reportedly considering a modification of the mandates of national (DFIs) and international development banks (MDBs) so that these institutions will be better incentivized to take on such “transformational” projects. A particular focus of the G-20 is the need for cross-border projects in sub-Saharan Africa (SSA), where large regional hydropower projects, for example, could generate power for a number of countries, if conducted on a regional, rather than national basis.

But tackling such projects, with ‘the potential to have a transformational regional impact,’ will involve much more than mandate changes. SSA’s regional institutions, supported by MDBs and regional DFIs, have a long history of trying to identify and develop such projects, but only a handful of such projects have ever been successful. As the G-20 now tries to encourage greater attention to such projects, it is worthwhile keeping in mind the huge challenges that have severely constrained this work in the past.

The key challenge posed by such projects is that they are radically different from typical, national-level infrastructure projects that might attract private sector participation.

Inga III, a huge hydropower project planned for the Congo River Basin in the Democratic Republic of Congo (DRC), is a good example of these differences. Inga III tops almost every list of transformational projects in SSA because of its potential to generate power that could be exported to countries as far away as South Africa and Nigeria. But after more than a decade of international planning and negotiations, Inga III has made very little progress, while project costs have been escalating precipitously....

‘Mindanao needs more climate-adaptation investments’

Alladin S. Diega in the Business Mirror (Philippines): Funding is urgently needed to finance climate-change adaptation initiatives in Mindanao given the increasing vulnerability of the region to extreme weather disturbances.

“The impact of extreme weather events are particularly severe, especially on the people of Mindanao, a region that is reeling at the same time from conflict and extreme poverty,” Justin Morgan, country director of Oxfam in the Philippines, said during a forum held on Friday. He said Mindanao has recently been experiencing strong typhoons, believed to be directly connected to climate change, putting the livelihood of the people in the province at risk.

“But we are optimistic, and we believe that is possible to build resilience of these communities if the national government is able to scale up support, and other development actors invest more in climate-adaptation and risk-reduction initiatives in Mindanao,” Morgan said.

The forum was attended by local executives from the Autonomous Region in Muslim Mindanao, Central Mindanao, Caraga regions, and international non-governmental organizations and funding agencies.

“Developed countries must abide by their responsibility to provide much-needed climate-adaptation finance to vulnerable developing countries, under the UN Framework Convention on Climate Change [UNFCCC],” Commissioner Naderev Sano of the Climate Change Commission said in a statement....

Mount Apo in Mindanao, the Philippines, shot by Suntown123, Wikimedia Commons, under the Creative Commons Attribution-Share Alike 3.0 Unported license. Subject to disclaimers

0.3% of GDP Would Protect East Asia from Climate Change - ADB Report

A press release from the Asia Development Bank: About 12 million people in 23 East Asian cities are at risk from rising sea levels, severe storms, and more intense drought caused by climate change that could jeopardize $864 billion in assets, a new report from the Asian Development Bank (ADB) warns.

Economics of Climate Change in East Asia notes that while climate adaptation investments can be large, the aggregate cost to protect the most vulnerable sectors - infrastructure, coastal protection, and agriculture - would be less than 0.3% of East Asia’s gross domestic product every year between 2010 and 2050.

“This report shows that the cost of inaction far outweighs the cost of climate change adaptation if countries act now,” said Ayumi Konishi, Director General of ADB’s East Asia Department. “Climate change not only brings challenges to East Asia, but also opportunities for stronger regional cooperation.”

The report recommends the People’s Republic of China (PRC), Japan, the Republic of Korea, and Mongolia together to invest an annual average of $22.9 billion for climate-proofing in the infrastructure sector, $4.2 billion for coastal protection, and $9.5 billion for the agriculture sector.

The report projects that severe weather related to climate change will intensify, with one-in-20-year flooding predicted to occur as frequently as every four years by 2050. When combined with rising sea levels, this is expected to cause massive swaths of land to disappear, forcing millions to migrate, and wreaking havoc on infrastructure and agriculture. Since 1970, economic losses to the four countries from climate-related natural disasters have amounted to more than $340 billion....

Infographic from the ADB website

US debates climate impact of development investments

Carey L. Biron in IPS: A debate is heating up [in Washington] over the extent to which U.S. government-facilitated private-sector development investments should be required to take into account how those ventures impact on climate change.

The discussions focus on a small and relatively little-known federal agency, the Overseas Private Investment Corporation (OPIC), the government office in charge of mobilising private capital in pursuit of international development priorities. While OPIC generally receives high marks, in recent years some groups have been particularly impressed by the agency’s focus on investments in small-scale, de-centralised renewable energy projects.

 “Outside of USAID” – the government’s main foreign aid arm – “OPIC is investing pretty much the only U.S. [government] money specifically for off-grid clean energy that directly supports clean energy access for the poor,” Justin Guay, a Washington representative for the Sierra Club, a conservation and advocacy group, told IPS.

“Any energy investment today by most agencies is about ‘energy access’, but this is disingenuous because that energy goes into the grid and the vast majority is then consumed by the rich and by large companies. Without associated infrastructure to rural areas or to make energy affordable for the poor, most of these investments are just increasing the general supply.”

OPIC’s mandate is set to run out soon, and Congress is currently tasked with figuring out the details of its re-authorisation. The Sierra Club and some other groups are warning that new legislation could undermine the agency’s unique coupling of climate-related and anti-poverty aims.

...Last week, OPIC and 14 other development institutions agreed for the first time to “substantially scale up” their green investments in developing countries, with the aim of collecting 100 billion dollars a year for the effort by 2020.  “The challenges of transitioning to a green economy are far outweighed by benefits of job creation, innovation and poverty alleviation,” Elizabeth Littlefield, OPIC’s president, said following the meeting....

A solar panel has replaced a windmill powering a water pump in Augrabies National Park in South Africa, shot by NJR ZA, Wikimedia Commons, under the Creative Commons Attribution-Share Alike 3.0 Unported license

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

Could climate bonds pave the way to a low-carbon economy?

Mike Scott in the Finance Hub blog at the Guardian (UK): We may have ideas for what we must do to move the world economy from its current high-carbon path to a low-carbon future. The problem now is how to pay for them.

Inevitably, much of the heavy lifting will have to be done by the bond markets, which are more suited than equity markets to the long-term investments that need to be made in power infrastructure, transport networks, agriculture, water, waste buildings and industry. Investors, particularly those that have signed up to the UN's Principles for Responsible Investment, are increasingly looking to put their money towards areas that will provide returns that are more sustainable and climate bonds are the ideal vehicle for this.

"Bonds are particularly suited for providing the capital for the long-term environmental infrastructure required to build a low-carbon, climate-resilient economy," says the Climate Bonds Initiative, which campaigns for more investment in low-carbon solutions.

According to HSBC, around $10tn (£6.5tn) of low-carbon investment was needed between 2010 and 2020 in the energy sector alone, $6tn of it in the form of debt. Climate bonds, where the money raised is allocated purely to low-carbon activities, could be crucial.

The market is growing rapidly – in 2012, $74bn of climate bonds were issued, 25% more than the previous year, says Bridget Boule, programme manager at the Climate Bonds Initiative. That makes the total climate-themed bond market now worth $346bn. Issuance remains dominated by the transport sector, particularly rail, followed by energy.

Nonetheless, compared to the size of the overall market, issuance remains tiny. "When climate bonds are issued, demand seems to be reasonably strong," Boule says. "The lack of products is the biggest barrier to the growth of the market."…

A generic bond certificate. Do not attempt to redeem! Not legal tender! Shot by Downingsf, Wikimedia Commons, under the Creative Commons Attribution-Share Alike 3.0 Unported license

Investors in agriculture ignore environmental risks at their peril

Oliver Balch in the "Finance Hub" at the Guardian (UK): Forget hi-tech stocks or shares in fast-growth pharma. Farming is where the clever money is heading these days. With the world enjoying the longest agricultural commodity boom since the second world war, billions of investment dollars are funnelling into farm-rich emerging markets such as Brazil, Nigeria and China. More established agricultural powerhouses such as North America and Russia are surging too. Many investors are sitting pretty as a consequence. Global farmland asset values, for instance, have quadrupled in value since 2002. Commodity prices have spiked as well, with the benchmark FAO Food Price Index more than doubling between 2002 and the end of 2011.

Yet, agriculture is not without its risks, particularly those relating to the environment. Climate change, green regulations, disease, fertiliser availability: the list of potential wobbles along the way is vast and complex. Take water. Global agriculture is currently responsible for 70% of all water withdrawn from aquifers, streams and lakes. If the taps are turned off or these water resources run dry, the implications for the farming sector are potentially disastrous. "You can't invest in agriculture without thinking carefully about these issues", warned Ben Caldecott, co-author of the new report, Stranded Assets in Agriculture, and a programme director at the University of Oxford's Smith School of Enterprise and Environment.

The potential losses are colossal. Using a high-level value at risk (VaR) assessment, Caldecott and his colleagues at the Smith School estimate that there's a 5% chance of agricultural-related losses amounting to more than $8tn (£5.17tn) in a single year. Other than a "very small band of investors", pension funds and other large financial institutions fail to factor environmental risks into their due diligence or product pricing when it comes to agriculture, according to Caldecott.

Such disregard is surprising. The idea that environment-related risks could cause assets to decline in value, or even turn into liabilities, has been preoccupying energy investors for a while now. A recent report by the think tank Carbon Tracker suggests that climate change could wipe trillions of dollars off the value of the world's largest oil companies...

Wheat stubble in Poland, shot by Ludek, Wikimedia Commons, under the Creative Commons Attribution-Share Alike 3.0 Unported license

Open data reveal extent of land grabbing

SciDev.net: The total area of land controlled by foreign investors globally is similar to the size of Poland, according to the most up to date estimates contained in an online database that aims to document large-scale land acquisitions or 'land grabs'. The database, called the Global Observatory, reveals that investors have acquired 32.8 million hectares since 2000 — up from its 2012 estimates of 26.2 million hectares.

Land grabs are often not conducted openly, which has made them difficult to monitor. However, the revamped online tool, revealed this month (10 June), allows for the crowdsourcing and visualisation of data as well as the verification of sources of such data, to promote transparency and accountability in land and investment decisions.

Most of that land has been acquired in Sub-Saharan Africa, with the top three investor countries being the United States, Malaysia and the United Arab Emirates.

Land grabbing has recently moved to the forefront of the international development agenda. Following the global rise in food prices in 2008, investors and some foreign governments bought land in the global South — often parcels totalling thousands of hectares — to try to cash in on agricultural commodities and secure food supplies....

Terraced farms in Bolivia, shot by Christopher Walker, Wikimedia Commons via Flickr, under the Creative Commons Attribution 2.0 Generic license

Developing world bucks decline in green energy funding

Siobhan Chan in SciDev.net: Spending on renewable energy is undergoing a geographic shift, with developing countries investing more last year despite an overall 12 per cent drop in global spending since 2011, according to two reports published this week (12 June).  The reports found that developing countries invested a total of US$112 billion in renewable energy in 2012, up 19 per cent from 2011.

Just under four per cent of the US$244 billion invested globally went on research and development, rising — albeit only slightly — for an eighth consecutive year. At US$9.6 billion in 2012, global R&D funding has almost doubled since 2004.

'Global Trends in Renewable Energy Investment 2013', by the Frankfurt School-UNEP Collaborating Centre for Climate & Sustainable Energy Finance and information service Bloomberg New Energy Finance, was published alongside 'Renewables 2013: Global Status Report' by REN21, a global renewable energy policy network.

Two-thirds of the 138 countries with renewable energy policies and targets were in the developing world, the Global Trends report found.  Of the developing countries, China continued to dominate the sector, increasing its investment by 22 per cent to US$67 billion. Latin American countries such as Chile and Mexico also increased their investment in the sector.

However, countries in the Middle East and Africa had the greatest growth, increasing spending by 228 per cent to US$12 billion....

A wind farm in Mongolia, shot by Steven Buss, Wikimedia Commons via Flickr, under the Creative Commons Attribution-Share Alike 2.0 Generic license

US eyes pension funds to renew crumbling infrastructure

Katelyn Fosset in IPS: President Barack Obama doubled down on a new push for infrastructure investment in a major speech Friday, highlighting roads, ports and bridges that many say have suffered from decades of insufficient upkeep.

“When the American Society of [Civil] Engineers put out their 2013 report card on our national infrastructure, they gave it the best overall grade in 12 years … the bad news is we went from a D to a D+,” President Obama said, speaking at a port in Miami.

...The American Society of Civil Engineers (ASCE) annual report the president referenced was released earlier this month and has spurred a debate over infrastructure and spending in Washington and beyond.

“We know that investing in infrastructure is essential to support healthy, vibrant communities. Infrastructure is also critical for long-term economic growth, increasing GDP, employment, household income, and exports. The reverse is also true – without prioritizing our nation’s infrastructure needs, deteriorating conditions can become a drag on the economy,” the report states. On Friday, President Obama outlined a new plan that, he said, would seek to attract private investment for public infrastructure, while also creating new bonds and offering more loans for similar projects.

A think-tank in Washington has one idea for leveraging private investment toward infrastructure: encourage the investment of labour union pension funds in infrastructure projects. “Couple [our poor state of infrastructure] with pension funds, which are long-term, patient investors, with stable, risk-adjusted returns, and this fits well with our fiduciary duty,” Dan Pedrotty, managing director of benefits and pensions at the American Federation of Teachers, said Thursday at the release of a report on the topic at the Center for American Progress (CAP)....

The Mianus River Bridge in Cos Cob, Connecticut, which failed back in the 1980s. US Department of the Interior photo

Focus cash on research infrastructure

David Dickson in SciDev.net: Few would name Ireland as one of the world's largest computer software exporters. Yet it has been this since the late 1990s, partly as a result of investing a significant slice of the development assistance it receives from the EC (European Commission) in the infrastructure required to become a knowledge economy.

This assistance has come through the 'structural funds' provided to the poorer parts of the EU (European Union). Countries such as Greece have invested most of the money received this way in more conventional construction projects, for example roads and airports. In contrast, Ireland has used much of it to build such things as research facilities and high-speed data networks.

There is no reason why developing nations, particularly in Africa, should not replicate Ireland's experience. Appropriate investment in research and innovation infrastructure can help them jump from a pre-industrial to a post-industrial society.

But to achieve this, two things must happen. National governments must genuinely prioritise innovation support. And development agencies must accept that investment in research and innovation infrastructure is as important as funding more traditional infrastructure projects, such as energy and transport systems….

Rock climbing in Cologne, shot by Elke Wetzig (Elya), Wikimedia Commons, under the Creative Commons Attribution-Share Alike 3.0 Unported license

Too big to flood? Megacities face a future of major storm risks

Bruce Stutz in the Guardian Environment Network (via Yale Environment 360): By the middle of the century, the scores of billions it cost to compensate the greater New York City area for being unprepared for superstorm Sandy may seem like a bargain. Without major adaptation measures to increase the level of storm protection beyond a 1-in-100-year event, the value of the city's buildings, transportation, and utilities utility infrastructures currently at risk from storm surges and flooding — an estimated $320 billion — will be worth $2 trillion by 2070, according to continuing studies by the Organization for Economic Cooperation and Development (OECD).

...Some of those cities with the most at-risk assets now — Tokyo, New Orleans, Amsterdam, Rotterdam, and Nagoya — will, over the next 50 years, be surpassed by Calcutta, Shanghai, Mumbai, Tianjin, Bangkok, Ningbo, and Ho Chi Minh City, booming Asian coastal metropolitan areas where trillions of dollars in economic assets will be vulnerable. So will many millions of these cities' residents, most of them poor and living in low-lying areas.

Just as banks grew "too big to fail," over the next half-century these coastal megacities may grow "too big to flood." But flood they will unless they dramatically revise their growth strategies and undertake major infrastructure projects designed to protect them from the dual threat of rising sea levels and intensifying storms, experts say.

Based on the conservative assumption that sea levels will rise by only 18 inches by 2070, the OECD finds that total assets vulnerable to flooding and storm surges of just 10 of these cities could account for some 9 percent of the world's GDP. But many climate scientists and coastal experts note that sea level rise forecasts by groups such as the Intergovernmental Panel on Climate Change did not factor in the melting of the Greenland and Antarctic ice sheets. When they are taken into account, these experts say that global sea levels could well rise 3 to 6 feet this century, leaving scores of cities and massive amounts of economic infrastructure dangerously exposed....

Employees from MTA New York City Transit worked to restore the South Ferry subway station after it was flooded by seawater during Hurricane Sandy. Photo: Metropolitan Transportation Authority / Patrick Cashin. Wikimedia Commons via Flickr, under the Creative Commons Attribution 2.0 Generic 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