CLIMATE CHANGE
A Nuanced Challenge Addressing the role of finance in climate change, Christophe Lalandre SEO at ADGM Branch and Michael Urban, Deputy Head of Sustainability Research, say that while it occupies the highest priority level as an investment conviction and that the financial sector’s role in enabling climate transition should not be underestimated, the matter is complex and open to misconceptions, but there are many opportunities too
the climate transition comes with many opportunities as well. For instance, as the world accelerates its transition towards renewable sources of energy, many Arab World countries face major opportunities to improve their energy security as well as their global trade competitiveness as they are gifted with some of the world’s highest wind and solar energy potential.
Does the public understand why banks must continue to provide services to essential though possibly carbon generating industries? There are a lot of misconceptions here. Perhaps the most prevalent and
H
ow does combatting climate change figure in your business mission imperatives?
It is mission critical, but to understand how and why we first need to define our terms as “combatting climate change” can be interpreted in several ways. Climate change is a complex phenomenon that entails environmental as well political and economic processes and outcomes, all which can be material to the risks and return profiles of financial investments. At Lombard Odier, sustainability is first and foremost an investment conviction. As investors, our key objective is to make sound investment decisions on behalf of our clients—as such, climate change is an integral part of our investment research and implementation strategy. Take physical risks for instance. In essence, physical risks are the physical manifestations of climate change (for instance heat waves, water stress, or hurricanes). Middle Eastern and North African countries are already naturally affected by difficult climatic conditions including high temperatures, scarce arable land and limited rainfalls and groundwater.
38
Christophe Lalandre, SEO at Lombard Odier, ADGM Branch
Michael Urban, Deputy Head of Sustainability Research
These are all set to be exacerbated by unmitigated global warming and could have dramatic effects on the prosperity and stability of the region. According to the World Bank, sea level rise could affect 43 port cities in the region (24 in the Middle East and 19 in North Africa). More specifically, in Alexandria, Egypt, a halfmeter sea level rise would cause over 2 million people to be displaced, and trigger $35 billion losses in land, property, and infrastructure value. But it is not all doom-and-gloom and investors should remember that
problematic one is the persistent use of carbon footprints (a current amount of greenhouse gas emissions) as a sole basis to assess the climate-suitability of an investment. To put it simply, being low carbon today does not necessarily mean being green today nor tomorrow. To illustrate this argument, take a company operating in a typically low carbon industry like media. Now imagine this media company is currently investing heavily in energy-intensive technologies like cloud-computing and satellite telecommunications without putting
Banking and Finance news in the MEA market
