Issue 6 - December 2021

SUSTAINABLE BUSINESS REVIEW

GREEN FINANCE • INNOVATION • ECONOMICS

Waste not Want not

ECONOMICS Green is the New Black

GREEN FINANCE Climate Risk: Protecting Bank's Balance Sheets from Uncertainty

INNOVATION & TECHNOLOGY Growing Pains: Making Room for Increasing Urban Populations

IN COLLABORATION WITH

About us

The Sustainable Business Review is the UK's first student-led quarterly magazine producing thought-provoking opinion pieces around green finance, environmental economics and innovation. We aim to bridge the gap between corporates and students when discussing sustainability, and want to inspire the next generation of environmentally-driven leaders.

We are a team of economists, engineers and business students, and we hope that you find our content insightful and it equips you with the knowledge to help gain a new perspective on our world.

Lead Editors

Industry Guests

Committee

Riya Vaid Innovation Lead Cian McDonagh Innovation Lead Grace De Bohun Finance Lead Ed Cox Finance Lead Dominique Gomez Economics Lead Jack Roycroft-Sherry Economics Lead

Samuel Grantham Investment Director at abrdn Anton Fedotov Co-Founder Airband Technologies Sheryl Owen Founder Surrounded by Opportunites

Max Ewerth President Jamie Alexander Vice President Igor Couto Marketing Co-Director Nara Mammadova Marketing Co-Director Olatomiwa Sanwo Sponsorship Director

Economics Authors

Innovation Authors

Finance Authors

Zaid Nurmamodo Natassia Nascimento Adam Curry Ulysse Abbate

Billy Green Oliver Jeffries Arun Jain Yusof Hassan

Atharva Palve Shivani Patel Kayil Hassan Anya Corvesor

About Green Finance

Dive into the world of ESG with corporates and financial markets all in one place.

About Innovation About Economics

Uncover the importance of Explore the interplay between innovations in technology and their economic theory and the influence on the carbon economy. environment. We aim to discuss We aim to discuss innovative topics topics such as inequality, sustainable and technologies, including growth, developing economies, and Contact us to have your firm featured on our magazine. pharmaceuticals and packaging. government policies.

ABOUT | 1

Contents SUSTAINABLE BUSINESS REVIEW

Waste not Want not

On the cover Our cover page considers the grave consequences of plastic pollution in our oceans and the devastating impact it has on marine life.

Fast Fashion Explores the emergence of this segment of the fashion industry and its environmental impacts, page 3.

Climate Contingencies Evaluates the prevalence of climate risk in the banking sector, page 17 Population Growing Pains Investigates the issues surrounding growing urban populations and the possible solutions, page 29.

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Green is the New Black Airpollution and its remedies - Interview with Anton Fedotov Why are Electricity prices reaching records?

Is it too late for Public Policy to save the Amazon Rainforest?

Should Saudi Arabia fear the Green Movement?

Green Finance Climate Risk: Protecting Bank's Balance Sheets from Uncertainty The Future of ESG Investing - Interview with Samuel Grantham The Fall of Fast Fashion Global Energy Crisis: What is Fuelling Surging Prices?

Is the Grass Greener? Green Government Pension Funds

Innovation Growing Pains: Making Room for Increasing Urban Populations Sustainable Construction - Interview with Sheryl Owen Gateway Bugs: The Key to a Sustainable Diet Turning Emissions into Value: Pond Tech's Misson - Our Future Loop: Reusable Packaging to Replace Plastic Waste

Q&A with Anton Fedotov

Q&A with Samuel Grantham

Q&A with Sheryl Owen

Page 7

Page 19

Page 31

@nottinghamgesoc

www.linkedin.com/company/nottsges nottinghamgesoc@gmail.com

CONTENTS | 2

ECONOMICS

Fast Fashion

Green is the New Black

by Zaid Nurmamodo

ALSO IN THIS SECTION

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Is It Too Late for Public Policy to Save the Amazon Rainforest?

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Should Saudi Arabia Fear the Green Movement?

FEATURED

ECONOMICS

Green is the New Black

By Zaid Nurmamodo The Fashion Industry is one of the world’s largest polluters, second only to the oil industry. Currently, fashion production makes up 10% of global emissions, but as populations and demands grow this figure is expected to increase by 45% come 2030 (McKinsey, 2020). The Fashion Industry is responsible for much more than just high emissions. Excess water consumption, waste accumulation and biodiversity loss are just a few of the negative consequences of fashion production.

However, unsustainability is not innate to all types of fashion. The main source of unsustainability in recent times has been ‘Fast Fashion’. So, what is Fast Fashion, and why is it so bad for the environment?

The disposability of clothes within fast fashion is not the only problem; the entire life cycle is pernicious. These clothes are often mass-produced using cheap materials that often include microplastics, and are often manufactured in Asian countries, where most factories continue to run on coal and gas. Moreover, a majority of this type of clothing is made from cotton, which requires a huge amount in the cultivating and dyeing process. Up to 20,000 litres of water is needed to produce just 1kg of cotton (Guardian, 2015). Such drastic pressure on a scarce resource has already led to dramatic ecological consequences, like the desertification of the Aral Sea. After the manufacturing process, the clothes are then shipped directly to the customer by postal services which produces additional emissions equivalent to that of 7 million cars every year (Axios, 2019). But it does not end there. Even after clothes have been thrown into landfill they can take up to 200 years to decompose, due to the presence of non-biodegradable synthetic fibres - which are used in 72% of our clothing (Edge, 2017). So, what can we do about it? One option would be to buy higherquality, durable clothing; but perhaps a more feasible and affordable alternative would be the ‘Repair and Resell’ model. Rather than buying huge quantities of lowquality clothing, we could mend old clothing, instead reselling or recycling them. There is quite a large existing market for this, with many customers seeking secondhand and vintage clothes from marketplaces such as Depop. Nevertheless, there is only so much that we as customers can do aside from changing our shopping habits, and recycling and reselling old clothing. We need change to be invoked by the fashion industry itself.

A Quick Trend Fast Fashion is defined as the mass replication of highfashion designs at a low cost. Why is this bad? The entire business model revolves around mass-producing lowquality, disposable clothes. Once people are done with last season’s clothes, they move onto the next. This pervasiveness of Fast Fashion has led to a higher turnover of clothes, with 85% of textiles going to the landfill each year and only 15% being recycled (BBC, 2020).

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Walk the Walk With growing awareness about unsustainable practices in the fashion industry, customers have begun prioritising sustainability in their purchasing decisions, which in turn has caused brands to incorporate a more sustainable approach to their practices. Environmentally-conscious purchasing decisions are not only affecting the Fast Fashion industry, but also luxury fashion. Despite producing highquality, durable clothing, luxury fashion houses have typically come under fire for unsustainable practices and their disregard for animal welfare. Luxury Fashion houses such as Kering and LVMH, despite starkly different approaches, have each shown their commitment to ‘ethical luxury’ and redefining what luxury can be. During Milan Fashion Week 2021, Kering announced that it would go entirely ‘fur free’ by the end of next year. Though renouncing fur is the right thing to do, this proposed ban does not extend to precious skins such as crocodiles or python, nor the more common leather.

Masking real problems with ‘pledges’ seems to be a trend of its own within the Fashion Industry. If these brands are to talk the talk, they must also walk the walk. Brands such as Primark and Asos have recently set out green pledges.

Amongst Asos’ pledges is a target to ‘ensure all of its ownbrand products are made from sustainable or recycled materials by 2030.’ Similarly, H&M had recently introduced ‘the recycled denim collection’ - an entire collection made out of recycled materials (H&M, 2021).

Though this drive towards recycling seems to be a step in the right direction, the extent to which recycling can mitigate climate change is often heavily overstated.

Recycling potential is limited by many factors, including fragmented infrastructure, the downgrading of recycled materials, and the rapid growth of fashion consumption (Forbes, 2021). This does not mean we should not encourage recycling clothes. Instead, we should acknowledge the real capacity recycling has to the end of mitigate climate change, rather than overstating it.

Fashion brands’ pledges and their overselling of recycling masks the prodigious amount of immediate action still required to mitigate fashion’s impact on the environment. Nevertheless, we are making small steps towards a more sustainable fashion industry, and so long as customers become increasingly conscious - and do not give in to - business models such as Fast Fashion, the industry can expect real progress in the future.

References: Axios, 2019. The climate stakes of speedy delivery. [online] Available at: <https://www.axios.com/fast-delivery-climate-change-amazon-walmarttarget-40d0b733-ad06-4b88-9a07-5ac9b6a5c03b.html? utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosfutureofwork&stream=future> [Accessed 27th October 2021] BBC, 2020. Why clothes are so hard to recycle. [online] Available at: <https://www.bbc.com/future/article/20200710-why-clothes-are-so-hard-torecycle> [Accessed 25th October 2021] Edge, 2017. Non-Biodegradable Clothes Take 20 to 200 Years to Biodegrade. [online] Available at: < https://edgexpo.com/2017/09/05/edge-fast-factnon-biodegradable-clothes-take-20-to-200-years-to-biodegrade/> [Accessed 25th October 2021] Forbes, 2021.

Fashion Is Overselling Circularity And Recycling—But There Is Hope. [online] Available at: <https://www.forbes.com/sites/brookerobertsislam/2021/10/01/fashion-is-overselling-circularity-and-recycling-but-there-is-hope/> [Accessed 25th October 2021] Guardian, 2015. World Water Day: the cost of cotton in water-challenged India. [online] Available at: <https://www.theguardian.com/sustainablebusiness/2015/mar/20/cost-cotton-water-challenged-india-world-water-day> [Accessed 26th October 2021] H&M, 2021. The recycled denim collection. [online] Available at: <https://www2.hm.com/en_asia3/life/culture/inside-h-m/presenting-recycleddenim-collection.html> [Accessed 25th October 2021] McKinsey, 2020. Fashion on Climate: How the Fashion Industry can urgently act to reduce its greenhouse gas emissions. [online] Available at: <https://www.mckinsey.com/~/media/mckinsey/industries/retail/our%20insights/fashion%20on%20climate/fashion-on-climate-full-report.pdf> [Accessed 23rd October 2021]

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Q&A Anton Fedotov Co-Founder Airband Technologies

Anton Fedotov Why did you decide to tackle the problem of air pollution?

Three years ago, with a friend of mine we wanted to look at how health is impacted by air pollution. To do that we had to get data on air quality. But we realised there was limited data available in London that would be of any help. We had begun reading about pollution as part of the project, and realised that pollution had grave consequences. It was killing people, causing cancer, reducing people's productivity, and yet we didn’t know what the condition of air pollution is here, or a few streets away. We have 2 or 3 sensors in a whole city. We started seeing campaigns for air quality that relied on people wearing individual sensors, or relied on community sensors, and we realised that it was just inefficient for every individual to try to start a campaign to raise awareness for the issue. We saw an opportunity to build a technological solution to monitoring air pollution that didn't involve a massive investment by the government. We wanted to help raise awareness and communicate the problems of air pollution through better air quality monitoring. That's the origin of our idea of dynamic air pollution monitors.

Could you summarise what AirBand Technologies does?

We provide monitoring as a service.

Instead of a government having to invest heavily in infrastructure and having them responsible for that, we want to provide that functionality for and on the behalf of citizens. We have quite a unique technology called dynamic sensors. They are specially designed sensors which can go on vehicles that are already on streets, such as cars, taxis and bikes.

A government can reach out to us asking that they need a certain area monitored, and we choose the right vehicles already in the area and combine that with traditional sensors which are placed on the likes of street corners - and we collect all that data on air pollution. Once we have that data we collect it and put it through our dashboard, which is a specially created software solution which is designed for clients to be able to see a live air pollution map, to see interactive details about air pollution and to compare trends, to see a granular overview that is simply not possible with existing technologies. They can also generate one-click reports; they do not have to be experts, and they can see what actions they need to take, and can share that with citizens in order to make sure people know what's going on and where they can improve. We create those sensors, we deploy them, and we continue to maintain them on behalf of our governments and partners.

What areas of development in combating air pollution most excite you?

Personally, its big data. Ten years ago, processing lots of data from many big sensors was unheard of. Being able to look at data live in an Internet-OfThings environment was just for big companies. What's exciting now is that that's available to anyone, even a small startup like us, where we're making the sensors at home and we don't have an office, working with individual partners and groups to put together trials and deployments. We're able to have things send data over the internet and process it in wonderful ways, we're able to code things on top of a system that can handle gigabytes and terabytes of data at the click of a button.

I think that is an amazing development.

Sensing technology itself isn't that exciting. Much of it is years old. It's about how it's used correctly. Its startups like us, and many others, that are taking new approaches to using the sensors, to doing new things with the data, that's what's really exciting.

In terms of combating air pollution, there's a lot that's being done as well. Its technologies like carbon capture, distributing those technologies that once used to be exclusively available to only big corporations and governments.

Technologies are getting smaller and smaller, being miniaturised, and soon we'd expect to have carbon capture in cities, in the streets.

How does collecting data help resolve air pollution?

It's just one step in resolving air pollution, but a very important one. If you don't know the problem, how can you fight it properly? if you know the air pollution in one london borough in one area is some figure, how is that going to tell you about whos experiencing air pollution, how air pollution is in schools, how it changes across streets?

If you don't understand the problem you cannot remedy it. If you don’t understand it you can't tackle it at the source. Obviously, vehicles cause it. But are there specific vehicles that cause most of it? A comprehensive monitoring solution would be able to drive traffic management, to help reduce the most polluting kind of traffic. Once you know and can see the problem it becomes a lot easier to tackle it, understand it, and fight it properly. Traffic management is one use case. At the moment existing solutions not only do not capture enough data, they don't share enough, because there is no standardised platform for sharing information, no one person sharing dashboards or facilitating communication.

Q&A | 7

iIt's individual companies selling sensors to communities, based on the goodwill of citizens, and then they must get data scientists to analyse it, and then you have one community that's slightly more aware. You don’t have a picture of the whole country, or different cities, or between different roads.

It's important because so many effects of the solutions we create have unintended consequences, and without monitoring you don't see those consequences. Things like the clean air zones in cities may just create more pollution in some cases by having cars stack up outside of cities, and maybe making things worse off. EV's are a great step in reducing air pollution, but they have tires that rub on the road and release rubber into the air which is a very harmful pollutant, counting as particulate matter. That's still going to be released by rubber tyres. So maybe we need to reduce transport as a whole or focus on public transport.

That's only something you can appreciate if you notice that we've banned all the petrol cars but we're still seeing high levels of pollution. If you assume the problem is solved because the air smells better you're not going to be able to capture those kinds of things.

What are the biggest challenges that you face?

The biggest challenge, unfortunately, is getting the government to do something, of working with people that spend their entire lives speaking about cleaning up the air, but as soon as they have to put the money where their mouth is it becomes a much more difficult proposition. Getting through to them as a small start up is difficult enough; getting them to take action is even harder. It's not going to make a huge amount of money for the government, for corporations.

It is going to help them protect their image. It's going to save money by avoiding spending on the traditional, more expensive solutions. But in the short term its a cost, and it's a cost that's going to cause more costs, because in two years we're going to say, 'Great, you've monitored it, here's how you clean it up.' And then they have to spend more money on that.

And nobody likes doing that. The biggest challenge is getting people to work with us, and to be able to respect the importance of the issue. The way we will be able to do that at a large scale will be through public pressure, raising awareness, and getting people to push for it in their communities, in the wider country, and in other countries as well. This is a problem that we've faced and we're going to face.

Which will be more important in sovling such problems, the public or private sector?

The private sector has some amazing benefits. It can move very quickly. It can deliver impressive results. It also has a lot of downsides in that unless you've got foundations or charities, it's often driven by a need for profit, which in some cases can be a good thing, but in others can create solutions that do not have the best interests of the people and the environment at heart.

The public sector has a lot of faults, but can be very powerful in persuading these new solutions. I think the technologies themselves will probably be developed both in universities, and in private startups, but the problem will be best resolved, at least in the UK and EU, in the interplay between the public and private sector. Luckily, I am seeing more and more of that, but it's still way less than it should be. There's more and more awareness of startups being

Anton Fedotov

used in government to help public problems, help work with the public sector better.

There will be innovations from both sides. They both need to do their part. The solution won't be the same in every country. In some it will be up to the private sector, in others the public.

Different solutions will be required in different areas depending on what's exactly causing the air pollution and climate emissions.

Q&A | 8

ECONOMICS

Why Are Electricity Prices Reaching Record Highs?

By Natassia Nascimento You may have noticed your electricity bill has risen this year. You would not be alone. In many countries, electricity prices this September reached a record high. For example, in Germany this year they have risen 36%, in France, 48%, and in Britain 62%. According to the OECD, the average increase was 18.6%, the highest rate of increase since September 2008. One explanation is the shortage of natural gas. Half of Europe’s supply comes from Norway and Russia, both of whom have suffered recent supply disruptions. National gas companies have turned to the liquefied natural gas (LNG) market, but face supply difficulties as a result of high demand from China and Japan. This has led to a rise in coal usage as nations have been forced to turn to alternative electricity sources. Of late, coal has also become expensive due to soaring electricity demand, thereby further increasing average electricity prices.

Many countries are regressing in terms of their carbon-reduction ambitions because of the current energy crisis. In 2015 coal produced about a quarter of Britain’s electricity, whereas in 2020 it accounted for less than 2%, only being used when other energy sources were temporarily scarce. On the other hand, wind and solar energy now produce around 20% of Britain’s electricity. In recent months, however, the air has been quite still, reducing the amount of wind power generated and obliging Britain to once again lean more heavily on coal energy, thus increasing the electricity bill as a whole.

Britain has Temporarily Ramped Up Coal Electricity Production

Oddly enough, over 5000 miles away in Latin America, a very similar situation is occurring, but for vastly different reasons. Mainly powered by fossil-free energy, Brazil and Mexico are now facing record high electricity prices.

Usually, most of their energy is provided by hydroelectric plants. However, both countries have suffered severe droughts this year. In Brazil, the National Energy Agency were forced to approve a 52% increase in the price of electricity, due to the need to resort to more expensive coal plants, and to import energy from Argentina and Uruguay.

Moreover, the Brazilian National Petroleum Company, Petrobras, also raised the prices of petrol, diesel and cooking gas in July.

Since 2015, Brazil’s electricity bill has been composed of three different hydroelectric scarcity levels: a green flag label for when hydroelectric reservoirs are full; a yellow flag for a medium level of capacity; and a red flag for when they are low. In September 2021, however, the National Energy Agency created a wholly new “Scarcity black flag” level, to account for the unprecedented low reservoir water levels (they are currently at 15% of capacity).

Brazilian Hydroelectric Reservoirs Normal conditions 'Scarcity black flag' conditions

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ECONOMICS

The Iguassu River: Normal Vs Drought Conditions The situation has meant that even with coal plants coming online, there is not enough electricity. Poor timing, considering summer is right around the corner, a time when electricity demand typically increases due to the need for more refrigeration. The upside is the end of the year usually brings heavy summer rains.

Nevertheless, that may not be enough. It could take a long while for reservoirs to fill up again, since Brazil is facing its worst drought in 91 years, according to the National Electric System Operator (ONS). As a consequence of the need for alternatives to hydroelectricity, August registered a record for energy generation through thermal, solar and wind plants. (In contrast, hydroelectric plants production is at its lowest level since the last energy crisis in 2002 at their lowest levels since 2002.)

Mostly dependent on hydroelectric production, Brazil naturally suffers when rains don’t fall as expected.

However, reduced electricity production is not the only adverse consequence. The Amazon rainforest unsurprisingly - needs rain to survive. The Amazon’s deforestation directly affects the hydrological cycles of the country, and “Deforestation and global warming work together and feedback on each other”, states Marcio Astrini, secretary executive of Observatório do Clima. Since deforestation reduces rainfall, which in turn is causing further losses to the Amazon, a potential consequence is that the country could permanently lose almost 40% of its electricity generation capacity due to deforestation and global warming.

In recent times, Brazil has produced on average 83% of its electricity from clean sources. Almost 64% of it comes from hydroelectric, 9% from wind, 9% from biomass, and only 1% from solar (Brazilian Government, 2021). Brazil has the second-largest hydroelectric plant in the world (Itaipu), but this year it generated 15% less than the same period in 2020, and its lowest level in 26 years. Droughts have meant energy companies have resorted to thermal plants, which not only pollute and cost more but use more water too (due to its cooling process), exacerbating already low levels of water, thereby reducing water supply for whole cities nearby. A better solution would be to use more solar and wind turbines, which generate clean energy and are cheaper. According to the National Energy Agency, there are currently 156 wind power and 68 solar power plants in construction in Brazil.

This is a step in the right direction, but more still needs to be done. Governments from all countries should redesign their energy markets to be less vulnerable to the cyclic nature of renewables, rather than simply turning back to coal and fossil fuels. New energy problems require new solutions, especially when the much bigger threat of climate change needs to be considered.

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References:

CNN Brasil. 2021. Aneel cria nova bandeira tarifária, e taxa extra da conta de luz é de R$ 14,20 | CNN Brasil. [online] Available at: <https://www.cnnbrasil.com.br/business/aneel-faz-novo-reajuste-em-taxa-extra-da-conta-de-luz-em-meio-a-crise-hidrica/> [Accessed 31 October 2021].

El Pais Brasil. 2021. Inflação dispara na América Latina com incerteza política, crise climática e incentivos ao consumo. [online] Available at: <https://brasil.elpais.com/economia/2021-08-31/inflacao-dispara-na-america-latina-com-incerteza-politica-crise-climatica-e-incentivos-aoconsumo.html> [Accessed 31 October 2021].

El Pais Brasil. 2021. O que liga o aumento na conta de luz ao desmatamento da Amazônia e à emergência climática? Tudo. [online] Available at: <https://brasil.elpais.com/brasil/2021-07-05/o-que-liga-o-aumento-na-conta-de-luz-ao-desmatamento-da-amazonia-e-a-emergencia-climaticatudo.html> [Accessed 31 October 2021].

El Pais Brasil. 2021. Preço da energia sobe na OCDE no ritmo mais alto desde setembro de 2008. [online] Available at: <https://brasil.elpais.com/economia/2021-07-05/preco-da-energia-sobe-na-ocde-no-ritmo-mais-alto-desde-setembro-de-2008.html? rel=listaapoyo> [Accessed 31 October 2021].

G1. 2021. Conta de luz está cada vez mais cara – entenda por que ela sobe e quais os problemas dessa escalada de preços. [online] Available at: <https://g1.globo.com/economia/noticia/2021/08/27/conta-de-luz-esta-cada-vez-mais-cara-entenda-por-que-ela-sobe-e-quais-os-problemasdessa-escalada-de-precos.ghtml> [Accessed 31 October 2021].

G1. 2021. Itaipu pode fechar 2021 com a menor geração de energia dos últimos 26 anos. [online] Available at: <https://g1.globo.com/jornalnacional/noticia/2021/10/23/itaipu-pode-fechar-o-ano-com-a-menor-geracao-de-energia-dos-ultimos-26-anos.ghtml> [Accessed 31 October 2021].

Governo do Brasil. 2021. Fontes de energia renováveis representam 83% da matriz elétrica brasileira. [online] Available at: <https://www.gov.br/pt-br/noticias/energia-minerais-e-combustiveis/2020/01/fontes-de-energia-renovaveis-representam-83-da-matriz-eletricabrasileira> [Accessed 31 October 2021].

Monitor, G., Club, S. and Horizons, C., 2021. Boom and Bust 2021: Tracking The Global Coal Plant Pipeline. [online] Globalenergymonitor.org.

Available at: <https://globalenergymonitor.org/report/boom-and-bust-2021-tracking-the-global-coal-plant-pipeline-2/> [Accessed 31 October 2021].

The Economist. 2021. How Britain decarbonised faster than any other rich country. [online] Available at: <https://www.economist.com/britain/2021/02/15/how-britain-decarbonised-faster-than-any-other-rich-country> [Accessed 31 October 2021].

The Economist. 2021. The first big energy shock of the green era. [online] Available at: <https://www.economist.com/leaders/2021/10/16/thefirst-big-energy-shock-of-the-green-era> [Accessed 31 October 2021].

The Economist. 2021. The world is kicking its coal habit. China is still hooked. [online] Available at: <https://www.economist.com/graphicdetail/2021/04/07/the-world-is-kicking-its-coal-habit-china-is-still-hooked> [Accessed 31 October 2021].

The Economist. 2021. Why has the price of electricity in Europe reached record highs?. [online] Available at: <https://www.economist.com/the-economist-explains/2021/09/15/why-has-the-price-of-electricity-in-europe-reached-record-highs> [Accessed 4 October 2021].

The Economist. 2021. Could climate change trigger a financial crisis?. [online] Available at: <https://www.economist.com/finance-andeconomics/2021/09/04/could-climate-change-trigger-a-financial-crisis> [Accessed 31 October 2021].

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Is It Too Late For Public Policy to Save The Amazon Rainforest?

By Adam Curry

On 2nd November, more than 100 world leaders promised to end and reverse deforestation by 2030, in the COP26 climate summit's first major deal. Might this be the saving grace for the Amazon, the world’s biggest rainforest, or is it too little too late?

The recursive nature of the issue of deforestation means it may already be too late for solutions. Recursive in this context refers to negative feedback cycles which, once put into motion, can be impossible to halt. A negative feedback loop is a common natural process, where a reduction of output in one time period leads to lower input in the next, further reducing output. This may seem daunting to consider, but it is necessary to truly comprehend the scale of issues facing Latin America and the rest of the world when tackling climate change.

The destruction of rainforests results in increased carbon dioxide levels in the atmosphere, as trees and plants act as a carbon sink. Agriculture leads to thousands of kilometres of forest being destroyed for farming and crops every year, contributing to deforestation. This deforestation - which contributes to global warming - is worse for agriculture, due to the negative effects of warming on crop yields. Researchers in the Nature Sustainability Journal combined a global dataset of field warming experiments conducted at 48 sites. They estimate yields of -7.1% for maize, -5.6% for rice, -10.6% for soybean and -2.9% for wheat below previous years. Their estimates were 95% probable for the first three staples and 89% probable for wheat (Wang, Zhao, Müller et al, 2020). Deforestation will thus lower output, causing more land to be used to produce the same amounts of food, thereby causing more deforestation, and all this potentially growing worse in a negative spiral.

Estimated Crop Yield Declines With 2 Degrees of Global Warming

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The second issue due to the recursive nature of the Amazon’s deforestation is that rainforests themselves create their own rainfall through transpiration and evaporation, which leads to moisture getting into the air and forming clouds.

Therefore, if you have less rainforest - via deforestation - then the rainforest starts to lose its ability to sustain itself.

Scientists think that this impact could be stopped if addressed early, but stress that once the degradation reaches a certain tipping point, it will likely only accelerate (Wilson, 2016). The loss of the rainforest might lead to a catastrophic loss of biodiversity, and would have a damaging effect on the world’s ability to capture carbon, accelerating global warming. The 2030 target to end deforestation might be too late.

The Recursive Nature of Amazon Rainforest Deforestation

There do exist prospective solutions to these issues. For the agricultural dilemma of falling crop yields, the rise of genetic modification of crops might be able to increase yields offsetting the loss from climate change, by producing plants more resistant to challenging conditions. This does present some ethical issues, however. Nevertheless, genetic modification of the sort that selects more heat resistant crops to replant and reproduce could have some offsetting effects. Regarding the issue of the Amazon rainforest in the future potentially failing to sustain itself, there has been mixed success. One area that has been targeted by public policy has been the helping of poor farmers through property rights, incentivising them to take better care of their land rather than moving from one place to the next. But this requires time, resources and organisation. Moreover, theories are slow to transition from journals and papers into real-world settings. There is a lag between understanding problems and implementing policy to combat them.

The new 2030 target to end deforestation is certainly a starting point in the battle to save the Amazon. However, there is about a 40% chance of global temperatures temporarily tipping above the 1.5°C pre-industrial threshold in at least one of the next five years (World Meteorological Organization, 2020). Therefore, a worrying picture is painted by current evidence on negative feedback loops. What matters most is changing policy domestically; if countries don’t change what they are doing individually, to restore degraded lands immediately, declarations like the 2030 target will prove empty. Only time will tell if this is a real catalyst for change.

References: Wang, X., Zhao, C., Müller, C. et al. (2020) Emergent constraint on crop yield response to warmer temperature from field experiments. Nat Sustain 3, 908–916. https://doi.org/10.1038/s41893-020-0569-7

WILSON, E. O. (2016). Half-earth: our planet's fight for life.

World Meteorological Organization (2021) Global Annual to Decadal Climate Update. https://public.wmo.int/en/media/press-release/new-climatepredictions-increase-likelihood-of-temporarily-reaching-15-%C2%B0c-next-5

Is It Too Late For Public Policy to Save The Amazon Rainforest? | 13

ECONOMICS

Should Saudi Arabia Fear the Green Movement?

By Ulysse Abbate

With the growing influence of the ‘green’ movement, the continued reliance on oil by many countries may seem shocking. Being the world’s second-biggest oil producer (after the USA) and its largest export, Saudi Arabia’s economy is yet to adopt eco-friendly sources of wealth generation (Armstrong, 2021)(Buchholz, 2021). According to OPEC, 50% of Saudi Arabia’s GDP stems from its large oil and gas supply (OPEC, 2021).

As you would expect, with more and more politicians adopting eco-friendly policies, Saudi Arabia and their pollution-inducing oil trade have been and will continue to be in the crosshairs. With a potentially rapidly changing global demand for oil-generated energy, does Saudi Arabia need to reform its economy to prevent recessions, maintain quality of life, and perhaps even avoid civil unrest?

First, consider the influence of the green movement on Saudi Arabia’s own domestic policies.

As with many countries, its domestic economy has been looking towards green policies, including their headline green initiative the Saudi Green Initiative (SaudiGreenInitiative, 2021). However, if we look at the SGI in-depth, we realise that it may be more greenwashing than it is encouraging.

It includes commitments to reducing CO2 emissions, but the changes are small and likely no more impactful than how the larger domestic economy might have been expected to shift naturally.

One policy involves planting a large number of trees, which, while it may help remove some CO2 from the air, shows no willingness to reduce gross emissions.

The final pillar of their initiative is to protect land and maintain it as conservation areas. However, if we compare the areas which have been designated for protection with the eco-geography of Saudi Arabia, we notice that the protected areas do not include areas with greenery (such as woodlands). In other words, they have failed to target those areas most in need (BiodiversityA-Z, 2021) (Researchgate, 2021).

The Disconnect Between Protected Land and Land in Need of Protecting Areas of Woodland in Dark Brown

Protected Land in Green

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ECONOMICS Therefore, perhaps we should not expect domestic policy to lead to any big shocks to Saudi Arabia’s economy, at least in the short term. However, with fuel exports being as their main source of income, changes in global oil demand may be the most important factor to consider (ArgaamPlus). This may affect the Saudian Arabian economy to a far greater extent than domestic policy ever could.

Whilst it’s hard to quantify the future of oil demand, there is certainly a long-term ambition to escape oildependence and look for alternatives for energy creation (Ritchie and Roser, 2021). Energy production in the world is increasing, but recently, fossil fuels have decreased in popularity in comparison to clean energy. Innovation in the field has led to businesses and countries feeling secure enough to begin transferring their energy production from oil to alternative fuels. Electric cars are on the rise, with governments encouraging their use, and hydrogen is being increasingly developed as a source of low-emission fuel (TheEconomist, 2021).

The Rise of Renewable Energy

A changing global mindset with regards to energy production and fuel sources has already affected policy in Saudi Arabia. To coincide with the COP26 summit, Saudi Crown Prince Mohammed Bin Salman announced plans to be a net zero emitter of CO2 by 2060. Whilst this deadline is not the most ambitious - given the long time horizon - it shows that, already, the global green movement is not going unnoticed by Saudi Arabia.

Whilst Saudi Arabia seems to be holding out well - and is talking the talk when it comes to improving their net emission levels - it seems that the changing global market as a result of the green movement could have large repercussions, potentially forcing them to start walking the walk sooner than expected. As the green movement grows, more countries may vote in governments that take a less-than-desired stance on oil use (as is likely to happen soon in Germany, for example). Since the Saudi economy is unlikely to be able to easily adapt to sudden changes, the green movement could spell the end for the economic growth that Saudi Arabia has been experiencing. That would be a difficult outcome, with potentially disastrous consequences.

References The Economist. (2021) A less than jolly green giant. Available at https://www.economist.com/europe/2021/07/15/why-the-european-union-is-a-lessthan-jolly-green-giant (Accessed: 19th July 2021) European Commission. (2021) Carbon Border Adjustment Mechanism: Questions and Answers. Available at https://ec.europa.eu/commission/presscorner/detail/en/qanda_21_3661 (Accessed 20th July 2021) Eurostat. (2021) Structural business statistics overview. Available at https://ec.europa.eu/eurostat/statistics-explained/index.php? title=Structural_business_statistics_overview (Accessed 20th July 2021) European Commission. (2021) The new common agricultural policy: 2023-27 Available at https://ec.europa.eu/info/food-farming-fisheries/keypolicies/common-agricultural-policy/new-cap-2023-27_en. (Accessed 20th July 2021) The Economist. (2021) At the coalface of climate policy. Available at https://www.economist.com/finance-and-economics/2021/07/15/the-euproposes-a-carbon-tariff-on-some-imports. (Accessed 21st July 2021) COPA-COGECA. (2021) Twitter. Available at https://twitter.com/COPACOGECA/status/1415346041029861377?s=20 (Accessed at 21st July 2021) European Commission. (2021) Citizen support for Climate Action. Available at https://ec.europa.eu/clima/citizens/support_en (Accessed at 23rd August 2021)

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GREEN FINANCE

Climate Contingencies

Climate Risk: Protecting Bank's Balance Sheets from Uncertainty

by Atharva Palve

ALSO IN THIS SECTION

22 26

The Fall of Fast Fashion

Is the Grass Greener? Green Government Pension Funds

FEATURED

FINANCE severe and unpredictable weather events such as droughts, flooding or intense storms, whereas transition risks develop as society changes its policies, investments, and strategies in response to climate change.

As physical and transition risks progressively increase in frequency, bank's will become more susceptible to the direct and indirect negative impacts of asset portfolio exposure to climate change. This unpredictability can lead to an “increase in stranded assets, uncertain residual values, and the potential loss of reputation” because of reduced credibility (McKinsey & Company 2020).

Climate-related damage to tangible assets and infrastructure is predicted to double by 2030, whilst 45% of the Earth’s land area is projected to experience a shift in climate classification by 2050 due to rising surface temperatures, altogether exacerbating the negative consequences of climate change on lives, ecosystems, and economies (McKinsey Global Institute 2020).

Impact of climate-related opportunities and risks on financial services (US$ bn)

Climate Risk: Protecting Banks’ Balance Sheets from Uncertainty

By Atharva Palve

The unprecedented scale at which climate change has accelerated in recent decades has amplified the potential risks it can cause to livelihoods, ecosystems, and economies worldwide. With the Earth’s surface temperature having risen by 1°C since 1900 and half of that increase occurring since the mid-1970s, a concurrent rise in the likelihood of extreme weather events is also increasingly expected (Royal Society 2020).

In the face of this looming uncertainty, it is imperative that banks, a fundamental cog in the global economy, act to mitigate risks posed by climate change.

Unpacking Climate Risk Climate risk has become an increasingly pertinent element of banks’ risk management strategies with its costs not only stemming from the physical risks climate change imposes but also the transition risk of shifting towards low-carbon activities.

Physical risks arise from chronic environmental conditions, such as rising sea levels or through certain

Source: Optimizing the Risk and Return of Climate Change (Accenture 2021)

These physical impacts can then constitute a rise in transition risks as various agents within economies respond. By developing alternative energy sources, innovating energy-saving technologies, and creating policies that decarbonise industries, which in turn sows the seed for another major transition risk; shifts in demand.

These shifts in demand are set to grow in pervasiveness, with UK demand for gas and oil expected to fall by as much as 34% by 2050 (OGUK 2020). Furthermore, complementary research by Accenture suggests that half of the world’s gas reserves and a third of current oil reserves will need to be left unused between 2010 and 2050 to prevent the Earth’s surface temperature from rising by

FROM THE COVER: CLIMATE RISK | 17

FEATURED

more than 2°C (Accenture 2021).

Hence, banks must have effective climate-risk management in place to protect intricately woven financial systems and their innumerable layers from uncertainty.

Mounting Pressure on Banks As governments and investors progressively shift towards more sustainability-influenced decision making, banks will need to bear the brunt of growing regulatory and market demands.

Although banks can accommodate for these pressures, key findings from a PwC survey of UK banks and building societies indicate that 65% are yet to “explicitly define climate risk” within their Risk Appetite Statements, despite continued emphasis by the Bank of England that “climate risk is a strategic priority” (PwC 2020).

This comes in addition to rising scrutiny against banks for financing fossil-fuel related ventures, with a report from a group of climate organisations, titled “Banking on Climate Chaos”, revealing that 60 of the world’s largest banks have collectively provided $3.8 trillion worth of funding to fossil fuel companies since the Paris Agreement was signed in 2015, despite claims of “net-zero by 2050”.

The problem mainly lies in the fact that banks have control over their policies and actions, however, they have limited ability to influence borrowers’ investment decisions.

In response to this, investors are increasingly incorporating the use of environmental, social and governance (ESG) factors when making investment decisions to ensure their funds finance “green” initiatives; more incentive for banks to shift their lending towards sustainable projects.

Acclimatising Banks to Climate Risk Banks can effectively manage climate risk by targeting two key areas of action, the first being to manage their financial exposure to climate change and the second, to channel their funds towards more sustainable causes.

Management of financial exposure relies on climate risk being sufficiently integrated into banks’ risk management strategies. This requires banks to effectively quantify risk through the use of risk measurement tools such as climate scenario analyses, regular and progressively more rigorous stress testing as well as evaluation of data on climate risk drivers.

FINANCE

Allowing banks to ascertain their risk appetite as well as necessary actions required to mitigate climate risk.

Potential actions that banks can undertake include more stringent assessments of borrowers’ investment activities diverting capital provisions away from particular polluting industries entirely and towards sustainable financing.

The outcome would be favourable to banks, as their loan quality, which is greatly influenced by climate risk, would rise, therefore, reducing the possibility of facing increased capital requirements.

The Future Climate for Banks Although major banks are ensuring they have more strategic risk management in place, many banks are still developing their ability to quantify their climate risk exposure. This is evident through data from a risk management survey of 88 financial institutions globally by EY and the Institute of International Finance, which revealed that only 28% of respondents had a “somewhat complete understanding” of their climate risk exposure (EY and IIF 2021).

It is clear that banks are still falling short in terms of their ability to measure their exposure to climate risk, however, a vast majority are addressing the rising need to finance a “green” agenda, with many prioritising investments in renewables, real estate, transport and alternative fuels to solidify their commitment towards addressing climate change.

The benefits to banks for successfully incorporating climate risk are not only individual to each institution but also provide a cornerstone for a societal transition towards a greener global economy. This stems from the fact that banks are a fundamental element in the global financial system, holding the ability to mobilise capital towards transforming energy production, capturing and storing carbon as well as electrifying transport and manufacturing.

Hence, time and commitment are essential factors for banks as they gradually shift towards more climateconscious business models, with those that can achieve this in the shortest period being able to reap the greatest benefits of low-risk and environmentally sustainable operations.

Therefore, in the face of rising physical and transition risks, greater influence of ESG factors in decision making, and strengthening regulatory demands, successful climate risk management is key to preventing excessive exposure.

FROM THE COVER: CLIMATE RISK | 18

Q&A Samuel Grantham Investment Director abrdn

You are currently the European lead portfolio manager for the climate transition bond fund, can you tell us more about your role?

I'm an investment director at abrdn and we manage around $14 billion assets under management for the global credit strategies. Within that we have various types of strategies, for example short duration strategies, more aggressive strategies and some more focused on high yield and emerging markets. Among them we also have our ESG offerings such as climate transition bond funds which are very thematic, very aggressive in terms of adaptation and mitigation.

And we also run a number of sustainable funds and exclusion-based funds based on ESG factors. Recently we launched the climate transition bond fund where I am the portfolio manager.

Could you tell us a little bit more about what a green bond is and how it can help achieve a climate outcome while also remaining attractive to investors?

You have different types of financing: you have classic vanilla type bonds or something more specific, such as a green bond, and there is a certain use of proceeds which have to be met to be classified as a green bond. For example, if you are a property developer and you are building new green buildings and they abide by certain green standards then you can classify those buildings for green bonds. If you are a utility company phasing out fossil fuels and expanding your renewable capacity and the proceeds are directly going towards that renewable project, it is classified as green. So, there is an element where you have to do certain reporting that includes certain elements which are important to get accredited. For green bonds you have different types of

financing within fixed income, you have sustainable linked bonds, green bones and also social bonds, which are more focused on housing and inequality. You saw a lot of social bonds being issued during COVID-19.

Is there any specific benefit of using fixed income securities in achieving these outcomes over other securities and equity?

You have different needs in terms of the return profile. There are certain benefits or positive outcomes of having ESG-linked bonds. With the green bonds, for example, you know exactly what the use of proceeds are because it is specific to a project and its financing. We looked at a company recently which is based in Georgia and this is an area that is extremely prone to flooding because of climate change. We invested in a specific project through a green bond looking at flood residents, not just addressing how we reduce emissions as an economy but also how we live with the consequences of climate change.

Many organisations achieve green credentials through negative screening, for example screening out heavily polluting firms. What is your take on this and is it a feasible path to take on the way to net zero?

There are two elements to it: there are the risks and the opportunities.

When owning a certain utility which is not committing to phasing out coal there are transition costs.

Samuel Grantham

That company loses value because it can no longer monetise a lot of those assets as demand for fossil fuels falls and that puts pressure on the credit metrics. As investors, we try to avoid companies with transition risk but by screening out these companies we potentially lose out on opportunities as well. There are opportunities in owning companies which are currently brown turning green and if you had an exclusion, you would avoid some of those. And having exposure to some fossil fuels, especially natural gas, has been a benefit for investors. Clearly, we need to remove coal as soon as possible and gas, but we need to move away from exclusion-based investing and do the research and engage with the companies.

There is an argument that you want to own stakes in unsustainable companies to change them, and many investors still hold many fossil fuel companies, do you think this argument is hypocritical?

Yes, I agree. For example, in our fund we own only one bank and we've gone through hundreds of banks, but these banks still advise to oil and gas companies and lend to them.

However, there is a bank based in the Netherlands, it's called Triodos, and they are 100% sustainable. They have no exposure to oil and gas, no exposure to fossil fuels and they do a lot of green lending. So, there are companies out there which are doing the right thing, but I agree, saying that engaging with these companies and forcing them to divest, we are not there at the moment, so that is just green washing.

Q&A | 20

You have mentioned some of the challenges involved in finding banks that are more committed to net zero so what are the main challenges that you face in your line of business?

I think one of the biggest challenges is that climate change is a global problem. We are seeing that the green agenda is very strong in Europe and UK, but certain regions do differ. For example, in COP26 India announced a net-zero target for 2050, but even if they commit to that target, they have to build renewable capacity to the same amount of the entire UK every year for the next decade, so they are coming from a different starting position. So. you cannot transform all economies overnight, it is a regional issue. And therefore, you need to compare companies to their regional peer groups, so when we are looking at an Indian utility we are comparing it to the peers in the South-East Asian regions based on their natural resources. The other issue is data. A lot of EM and high-yield companies don’t have the capacity to report this kind of data, unlike companies like Microsoft that have entire teams specialised on ESG reporting. That is why we are engaging with these companies to gather and understand this data.

The third issue is greenwashing, especially in green bonds. We have seen much issuance of green bonds because the cost of financing can be lower. A property developer can issue a non-green bond and a year later they can issue a green bond at cheaper funding than their current debt outstanding because the investor base is potentially interest. So there is an incentive to issue green bonds and sometime you need to look into the details. For instance, if they are refinancing a building that they built two years ago and there is no environmental value in it you must raise the question whether that is truly the right direction.

You mentioned COP26, how optimistic are you about the outcomes from the summit in relation to green bonds and ESG investing more specific?

There is a lot of headlines coming out, such as the U.S committing to zero fossil fuels by 2035, which is incredibly ambitious, and I don’t think that is achievable given their current product mix. There are some really positive outcomes, especially regarding methane leakages and ending deforestation by 2030, which is great.

The problem is in the details, because you get these headlines, but you want to know how feasible it actually is, and the U.S headline is a great example.

I am hopeful but I think we would have liked to see more. It would be nice to have China to commit to coal fade out.

Do you feel your role is quite well integrated or do you feel at this stage it's all very new and sort of an addon?

It is completely front and centre. Just because we launched this fund does not mean we are not thinking about this climate lens for all funds. Across all our funds we are questioning whether we should ever invest in oil and gas companies again. Last week we committed to reducing the carbon intensity of our investment portfolios by 50% by 2030. Obviously, that is intense, but that is a large commitment. Our head of fixed income is very up to speed and the climate transition bond fund gets huge attention from investors and people are starting to take it seriously.

You completed your Engineering degree at Nottingham, what advice you have for readers that have interest in following in your footsteps.

Samuel Grantham

One of the most important things is to keep an open mind. When I applied for the graduate scheme, the reason I was interested because it was a rotation around different departments, and I didn’t know where exactly I wanted to work at. There will be certain skillsets, which you will develop as you progress, and certain skillsets will be more aligned with certain roles. The other thing is not to be too concerned about your current degree, obviously I haven’t used much engineering.

What people are interested in is what you do in your spare time as well, your hobbies and interests.

Q&A | 21

FINANCE

The Fall of Fast Fashion

By Anya Corvesor

Impact of fast fashion vs second-hand apparel on the environment Consumers are choosing to extend the life of an item rather than creating demand for new items and leading to more waste. In the US alone 36 billion clothing items are thrown away each year yet 95% of these could be reused or recycled (ThredUp, 2021). However, simply extending the life cycle of clothing by 9 months can reduce the fashion industry’s carbon emissions by 30% (Mckinsey, 2020), giving impetus to consumers to wear clothes longer or buy second hand.

As people are becoming more eco-conscious they are engaging less with fast fashion, by purchasing second hand. It is thought people would rather shop second hand than buy clothing simply labelled ‘sustainable’ due to the fears of greenwashing (Klerk, 2021). ThredUp, a secondhand apparel selling site, conducted a study concluding that the second-hand market is projected to double in size in the next 5 years (ThredUp, 2021). This has the potential to have a huge positive environmental impact as fast fashion is currently the second most polluting industry on the planet (Sustain Your Style, 2017). Any reduction in this problematic industry is a win for the earth.

Was the pandemic a catalyst?

It has been argued that the Covid-19 pandemic acted as a catalyst for this extreme growth; with decreased economic security resulting in consumers prioritising cheaper options. ThredUp found that 1 in 2 consumers care more about seeking value (making the most of every penny) postpandemic than they did beforehand (ThredUp, 2021), potentially due to the dramatic rise in unemployment across the globe and the impact this had on consumers’ disposable income.

The effect on the fast fashion market In terms of the impact this shift will have on the fast fashion market, it is arguable that reduced consumption will soon become evident as people opt for second-hand instead. Leading to large decreases in the values of some fast fashion brand stocks such as Boohoo as people lose confidence in fast fashion and its detrimental practices.

Since 2019, Boohoo has been known as one of the least sustainable fashion brands in the UK (Environmental Audit Committee, 2019); receiving the worst possible consumer ratings for environmental reporting and toxic chemicals (Tyler, 2021). Investors may choose to invest in secondhand

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FINANCE

sites such as ThredUp or RealReal instead; which have been found to be strong buys by analysts.

There is a potential saviour for many fast fashion brands: the accommodation of consumers buying secondhand clothes from the brand. This particular idea is one that can be accommodated by ThredUp, that allows consumers to simply send back their used clothes to the brand who in return reward that consumer with credit at their company. ThredUp then prices, advertises and sells the clothes for the company who gets to keep the generated profit. A service like this is something firms are being pressured by consumers to introduce, with brands like Levi’s and Asos having their own versions. According to research, 62% of consumers would buy more from fashion brands that partner with second-hand players (Estripeau et al, 2020). Companies that manage to move with the times, like ASOS, will perhaps survive the fall of fast fashion but brands that fail to become more sustainable may experience issues in the future.

Because of fast fashion's unique ability to quickly produce and ship on trend clothing in a range of sizes, coupled with habitual behaviour and brand loyalty, it becomes evident that until consumer preferences shift more widely, second hand retailers will struggle to take down fast fashion. What is more likely in the short term is that existing retailers will adapt to meet the sustainability demands of some of their customers

References Environmental Audit Committee, 2019, Fashion Retailers’ Responses, viewed 26/10/2021, https://publications.parliament.uk/pa/cm201719/cmselect/cmenvaud/1148/ 114804.htm Estripeau, R, et al, 2020, The Consumers Behind Fashion’s Growing Secondhand Market, viewed 15/10/2021, https://www.bcg.com/engb/publications/2020/consumer-segments-behind-growing-secondhandfashion-market Klerk, A, 2021, Secondhand clothing market set to be twice the size of fast fashion by 2030, viewed 04/10/2021, https://www.harpersbazaar.com/uk/fashion/fashionnews/a36810362/secondhand-clothing-boom/ Mckinsey, 2020, Is luxury resale the future of fashion?, viewed 14/10/2021, https://www.mckinsey.com/industries/retail/our-insights/is-luxury-resalethe-future-of-fashion Sustain Your Style, 2017, Fashion’s Environmental Impact, viewed 14/10/2021, https://www.sustainyourstyle.org/old-environmental-impacts ThredUp, 2021, 2021 Resale Report, viewed 4/10/2021, https://www.thredup.com/resale/#resale-industry Tyler, A, 2021, What’s the ethical impact of Boohoo and ASOS buying up well-known fashion brands?, viewed 26/10/2021, https://www.ethicalconsumer.org/fashion-clothing/whats-ethical-impactboohoo-asos-buying-well-known-fashion-brands

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FINANCE

Global Energy Crisis: What is Fuelling Surging Prices?

By Shivani Patel Europe’s energy crisis has gradually become a global energy crisis as prices for natural gas, electricity and coal surge around the world. Wholesale power prices in Germany and France have increased by 36% and 48% respectively since the start of September, reaching record levels at €160 per megawatt hour (The Economist, 2021).

The equity markets have not been unaffected as the global energy crisis intensifies. Stock prices for companies that consume a lot of energy have plummeted, while the stock prices for energy producers have skyrocketed.

In the UK, prices are at £385 per megawatt hour, increasing almost threefold from a few weeks ago. Natural gas has seen the steepest increase in price, with European and Asian rates at ten times the price compared to this time last year (The Economist, 2021).

Figure 1: European natural gas price index, showing natural gas prices in Europe since 2005. It highlights the exponential increase in gas prices within the past year (Intercontinental Exchange, 2021).

What has caused soaring gas and electricity prices?

Commodity prices have soared globally, but natural gas has been affected the most, particularly in Europe. Markets are rallying in response to the rising demand for energy, as economies around the world rebound after national lockdowns are lifted. Natural gas is used to generate approximately one fifth of Europe’s electricity, a third coming from Russia and a fifth from Norway. Disruptions in

the supply chain from both countries are fuelling the rising gas prices (The Economist, 2021).

The scarcity of natural gas in Europe has had a snowball effect on energy supplies in the rest of the world, with India and China also teetering on the verge of their own energy crises. Coal accounts for around 70% of India’s electricity generation, and as of the 6th of October, the Indian government announced that 108 out of 135 of India’s coal plants had less than 8 days of supply left, with over half of those having less than 2 days’ worth of stock (Choudhury, 2021). To keep up with rising demand, India has been importing 20% of its coal from abroad, with scheduled power cuts being implemented across Gujarat, Punjab and Maharashtra (Ellis-Petersen, 2012). Over 70% of China’s electricity generation also relies on coal, and in September, China also imported almost 33 million tonnes, 76% more than it did in September of 2021, causing businesses and factories to resort to rationing power (Riordan, Langley, 2021).

Carbon taxes and the transition to renewables could also be blamed for this steep increase in energy prices, as in Germany and Britain, for example, wind and solar generation was 50% below its five-year average. The effect of this has been particularly acute in Britain which is reliant on these two sources of power for 60% of its electricity generation, almost twice the European average (The Economist, 2021). This highlights the importance of having the right balance between energy security and energy accessibility. Normally, renewables are seen as more secure as they don’t have as many political or price risks associated with them as non-renewable fuels do, however just as this security is needed, renewable sources of energy aren’t producing near enough the amount of energy needed.

Is this a wakeup call for investors?

As winter approaches, and demand for energy increases, companies that produce gas, coal and oil are expected to continue benefitting. In Europe, BP Plc, Royal Dutch Shell Plc and TotalEnergies SE are big names that may rally further, and in Asia, investors are eyeing up Inpex Corp.,

GLOBAL ENERGY CRISIS | 24

FINANCE

Petronas Gas Bhd., and Reliance Industries Ltd. If the current trends in the energy market continue into 2022, analysts at Goldman Sachs have predicted that TotalEnergeies SE and Eni SpA could see earnings boosted by 18% and 12% respectively. Exxon Mobil Corp. reported in September that elevated gas prices will boost its third quarter profit by around 700 million USD. Power utility companies, on the other hand, are struggling in the markets; with Iberdrola SA and Endesa SA trading at their lowest prices in over a year (Vishnoi, Bradham, Adinarayan, 2021).

References The Economist (2021). Why has the price of electricity in Europe reached record highs? [Online]. Available at: https://www.economist.com/theeconomist-explains/2021/09/15/why-has-the-price-of-electricity-in-europereached-record-highs Choudhury, S. R. (2021). China isn’t the only huge Asian economy with a coal shortage now. [Online]. Available at: https://www.cnbc.com/2021/10/12/coal-shortage-india-could-soon-be-onthe-brink-of-a-power-crisis.html Ellis-Petersen, H., (2021). India faces electricity crisis as coal supplies run critically low. [Online]. Available at: https://www.theguardian.com/world/2021/oct/12/india-electricity-crisiscoal-supplies-critically-low Riordan, P., Langley, W. (2021). China coal and natural gas imports surge as energy crisis bites. [Online]. Available at: https://www.ft.com/content/ff4f8306-e8b8-41e4-9ce0-702ec86ef182 Vishnoi, A., Bradham, B., Adinarayan, T. (2021). A Stock Trader’s Guide to Navigating the Global Energy Crisis. [Online]. Available at: https://www.bloomberg.com/news/articles/2021-10-02/a-stock-trader-sguide-to-navigating-the-global-energy-crisis Green, N. (2021). Global Energy Crisis is a Wake-up Call for Investors: deVere CEO. [Online]. Available at: https://www.thestreet.com/economonitor/news/global-energy-crisis-is-awake-up-call-for-investors-devere-ceo

Figure 2: Percentage changes in the MSCI World Indexes for Utilities, Materials and Energy equities as a result of the global energy crisis. It shows how energy producer share prices have soared, while users have plummeted (MSCI, Bloomberg, 2021).

Nigel Green, chief executive and founder of deVere Group, worries that “these astronomical surges are now in danger of pushing back the critical transition towards cleaner energy sources”. The popularity of green initiatives may also be reduced due to the ‘Insulate Britain’ protests currently taking place which are causing disruption to roads across the UK, as well as the intermittent supply of clean energy to the country. He noted that, “savvy investors will take a wider, longer term look at this situation” (Green, 2021). With governments backing ESG criteria, especially climate change initiative, investor confidence is boosted.

Therefore, investors will be trying to get ahead of the curve by investing heavily in more climate conscious and clean energy initiatives. From this, large wind, solar and hydroelectric companies, like Orsted A/S, Azelio AB and SolarEdge Technologies Inc., may eventually come out on top.

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FINANCE

By Kayil Hassan What is ESG?

Is the Grass Greener? Green Government Pension Funds

From recycling our rubbish or going vegan to using the car less frequently, many people are making changes to their daily lives to reduce harm to the planet. This trend has also emerged within the investment space, where there has been significant growth in funds centred around ESG factors such as climate change and carbon emissions, customer satisfaction, data protection, board compositions and committee structures (CFA Institute, 2021). In 2020 alone, Global ESG-related funds took in nearly US$350bn up 112% from the year prior (Cumbo, 2021).

Who are GPIF? One key player seeking to transition towards an ESG driven investment strategy is Japan’s Government Pension Investment Fund (GPIF) which has $1.6bn assets under management. Since 2017, the world’s largest pension fund has begun to place a significant emphasis on ESG and corporate governance issues when making its investments.

There are two key reasons for this shift towards an increasingly ESG focused investment strategy. The challenge posed by Japan’s ageing population means the fund needs to take an extremely long view when investing, given its need to pay the pensions of individuals who are expected to live well beyond their 80s and even into their 90s. Secondly, the Japanese government, which until recently has been highly resistant to change fuelled by environmental factors, has taken a leadership role in carbon neutrality. Prime Minister Suga announced the goal that by 2050 Japan would be carbon neutral (Runacres, 2021).

In 2017, the fund started allocating funds to ESG investments with a $27bn investment into shares with strong ESG scores as well as ESG indices such as the FTSE Blossom Japan Index (Runacres, 2021). The following year saw GPIF invest another $10bn in low carbon indices while proposing to all external asset managers it uses in Japan to take ESG consideration as a key measure of investment decisions. Last year the fund invested $11.8bn into two ESG foreign equity indices (Ren, 2021). Given the scale of the GPIF investments, this activity has garnered huge attention domestically, and more broadly across Asia. The very open approach taken by GPIF in publishing allocations and indices used has had a huge impact, especially among domestic Japanese firms; creating greater awareness and spurring on some to make changes to their investment strategies.

Japan's ESG Adoption Problem However, the Japanese government has faced harsh criticism with many believing more measures need to be implemented to force an industry-wide shift towards responsible investing. This comes after Japan ranked 15th in the United Nations Principles for Responsible Investment (PRI), where there were only 92 Japanese signatories committed to the 6 key principles such as incorporating ESG issues into investment analysis and decision-making processes and seeking appropriate disclosure on ESG issues (United Nations, 2021).

One reason for Japan’s lack of adopting ESG indices and investments is the value they offer in comparison to other investments. An example of this is one of GPIF’s earliest ESGpicks which was a thematic social index, investing in

PENSION FUNDS | 26

FINANCE

domestic companies that hire and promote women (MSCI, 2018). The MSCI Japan Empowering Women Index (Win index) has fared poorly against the benchmark Topix Index accentuating the notion that ESG does not necessarily offer the best returns. Performance is all-important to GPIF because the fund’s objective is to pursue a real investment return of 1.7% per year to cater to Japan’s ageing public workers whose pensions are invested with them. This accentuates one of the key issues that plagues ESG investing.

Summary ESG is still an area of investing many consider too broad to implement and hence, exclusion approaches are increasingly seen as an easy way to claim ESG responsibility. Often investors will flock to investments that have strong ESG ratings but do little to achieve the goals.

Other funds focus on broad themes that incorporate the changes relating to ESG factors, however, this also falls foul of the same problem. Where financial returns are not as high as traditional investment types, investors should at least be able to derive value from the investments’ creation of tangible ESG benefits. Despite the lower-than-normal returns on their ESG investments; part of the reason for GPIF incorporating ESG in their decision making was to ensure long term stability- so in a way they derive some value from this.

References CFA Institute, 2021. CFA Institute. [Online] Available at: https://www.cfainstitute.org/en/research/esg-investing [Accessed 21 October 2021].

Cumbo, J., 2021. Financial Times. [Online] Available at: https://www.ft.com/greenpensions [Accessed 21 October 2021].

MSCI, 2018. GPIF, one of the world’s largest pension funds, selects NEW MSCI Japanese ESG Indexes in a significant step towards ESG integration.

[Online] Available at: https://www.msci.com/documents/10199/60420eeb-5c4e4293-b378-feab6a2bf77f [Accessed 12 October 2021].

Ren, S., 2021. Bloombergquint. [Online] Available at: https://www.bloombergquint.com/gadfly/the-world-s-largestpension-fund-has-cooled-on-esg-should-you [Accessed 18 October 2021].

Runacres, D., 2021. Refinitiv. [Online] Available at: https://www.refinitiv.com/perspectives/future-of-investingtrading/why-is-japan-embracing-esg-investing/ [Accessed 19 October 2021].

United Nations, 2021. United Nations Principles of Responsible Investing.

[Online] Available at: https://www.unpri.org/pri/about-the-pri) [Accessed 26 October 2021].

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INNOVATION

Population Growing Pains

Growing Pains: Making Room For Increasing Urban Population ALSO IN THIS SECTION

by Billy Green

35

Gateway Bugs; The Key to a Sustainable Diet

39

Loop: Reusable Packaging to Replace Waste Plastic

FEATURED

INNOVATION

GROWING PAINS MAKING ROOM FOR INCREASING URBAN POPULATION

By Billy Green

Tight Squeeze: The Population Problem In the last 200 years, the global population has increased from 1 billion people in the 1800s to almost 8 billion people today (Roser et al. 2019). Although the rate of population growth peaked in the 1960s at a rate of 2.2%, the total world population is still very much rising which has huge implications for the global environment, demands for goods and services in our communities, and on living standards as a whole. The impacts of vast population increase can be seen at an individual, local and global scale and with the prospect of a declining population out of view, we can only expect these problems to become more prominent in our daily lives.

Population growth over time data (Roser et al.

2019

While many countries such as the UK enjoy a reasonable standard of living today, they may not be in future years if they do not continue to operate in their carrying capacities. There are severe risks that population growth may compromise living standards and environmental objectives (King & Slesser 1995).

Specifically, population increases are contributing to a greater scale of urbanisation; population increases are growing at a larger scale in our towns and cities. This has

great impacts on urban living standards including higher urban unemployment rates, higher property prices, and worsening environmental conditions (Zhang 2016).

Further to this, population growth can affect living standards and environmental objectives through cramped living conditions, reduced access to public services, or the expansion of infrastructure from urban areas into the surrounding rural area.

Spacemaker Growing populations increased strain on urban areas, the expansion of infrastructure onto rural areas. All these problems accumulate to create one big puzzle. How can we ensure living standards and environmental conditions are not compromised in a situation where population increase seems inevitable?

Spacemaker is a start-up that is providing an innovative solution to the growing pains which are being experienced in towns and cities. The company, whose aim is to develop sustainable infrastructure that can help companies grow while decreasing environmental pollution, has received $25 million in funding for its venture (Sajid 2021).

According to the company, the global population is set to hit 10 billion people on Earth by 2050 with 90% of future population growth taking place in cities (Spacemaker 2020).

Furthermore, buildings account for 40% of all carbon emissions – Spacemaker’s goal is to create more sustainable solutions for urban development, adhering to the UN’s Sustainable Development Goal 11: Sustainable Cities and Communities (UNDP 2021). So, how does it work?

Spacemaker used a cloud-based AI software to identified an industry that is struggling to adapt to environmental challenges: construction. Furthermore, it is a field that is lacking in AI technology when compared to other sectors of the economy. Their tech uses AI to “help architects, urban planners and developers make better decisions faster”.

SPACEMAKER: OVERPOPULATION | 29

FEATURED This is achieved by allowing technology to analyse and assess unused urban spaces for architects and developers to build office spaces and residential areas within. Therefore, you can maximise the use of as much space within a city and build up, rather than build-out.

Developers input data into their system which in turn produces various layouts of building possibilities.

The result is a reduction in urban expansion into the surrounding rural areas and the establishment of sustainable homes and offices. You can fully utilise as much space as possible within the cities addressing the issues of growing urban populations while reducing the environmental impact of building on city fringes.

Furthermore, the solutions Spacemaker offers are more efficient and faster than if the software was not used by developers and architects.

Spacemaker is providing innovative solutions for the problem of growing urban populations!

INNOVATION

References: King, Jane & Malcolm Slesser (1995) ‘Prospects for Sustainable Development: The Significance of Population Growth’, Population and Environment, 16: 487-505. Available at: https://link.springer.com/article/10.1007/BF02208558#citeas (Accessed 12th October 2021) Rosier, Max, Hannah Ritchie & Esteban Ortiz-Ospina (2019) ‘World Population Growth’, Our World in Data. Available at: https://ourworldindata.org/world-population-growth (Accessed 12th October 2021) Sajid, Arsalan (2021) ’70 Best Startups You Need to Watch Out For in 2021’ Available at: https://www.cloudways.com/blog/best-startups-watchout/#travel (Accessed 12th October 2021) Spacemaker (2020) ‘About Us’ Available at: https://www.spacemakerai.com/about/about (Accessed 12th October 2021) UNDP (2021) ‘Sustainable Development Goals’ Available at: https://www.undp.org/sustainable-development-goals (Accessed 12th October 2021) Zhang, Xing Quan (2016) ‘The Trends, Promises, and Challenges of Urbanisation in the World’, Habitat International, 54/3: 241-252. Available at: https://www.sciencedirect.com/science/article/abs/pii/S0197397515302125? casa_token=HEPeB6kXlZYAAAAA:tRI9cDl1ay1b_oe6Pk1enI2IY695RLySbLzAe FoEXPh5bGl7ZHTcPOAs4pD8HobR1xn5vAQI0A (Accessed 12th October 2021)

Conclusion Population growth poses a considerable problem for communities the world over. With limited resources and indeed space, living conditions are likely to come under pressure in the coming decades in population growth rates continue as predicted. With growing urban populations over time, environmental conditions can come under pressure as can the standard of living in many communities around the globe.

Spacemaker is an innovative start-up aiming to address these problems. Its use of AI provides a promising method by which architects and town planners can utilise the space within cities to create sustainable living and office spaces for the generations of the future.

SPACEMAKER: OVERPOPULATION | 30

REFERENCES Anon, (n.d.). Malaysia’s 1st Pilot Run of Peer-to-Peer (P2P) Energy Trading – SEDA. [online] Available at: http://www.seda.gov.my/2020/11/malaysias1st-pilot-run-of-peer-to-peer-p2p-energy-trading/ [Accessed 23 Jul. 2021].

Greenmatch.co.uk. (2015). Solar Panels in the UK - How Popular are They? | GreenMatch. https://www.greenmatch.co.uk/blog/2015/08/how-popular-are-solar-panels-in-the-uk. [Accessed 2 Aug. 2021].

Investing.com UK. (n.d.). Powerledger - Power Ledger Price https://uk.investing.com/crypto/power-ledger [Accessed 27 Jul. 2021].

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Ofgem. (n.d.). Costs in your energy bill. [online] Available at: https://www.ofgem.gov.uk/information-consumers/energy-advice-households/costsyour-energy-bill [Accessed 23 Jul. 2021] PEER-TO-PEER ELECTRICITY TRADING INNOVATION LANDSCAPE BRIEF ABOUT IRENA. (n.d.). [online] https://irena.org/-/media/Files/IRENA/Agency/Publication/2020/Jul/IRENA_Peer-to-peer_trading_2020.pd [Accessed 1 Aug. 2021].

.

Available

Vaughan, A. (2018). Majority of UK public want to install solar panels, poll finds. [online] the Guardian. Available https://www.theguardian.com/money/2018/aug/20/majority-of-uk-public-want-to-install-solar-panels-poll-finds. [Accessed 23 Jul. 2021].

at:

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www.ukpowernetworks.co.uk. (n.d.). UK Power Networks - Brixton residents first in UK to trial smart “flexible energy” project. [online] Available at: https://www.ukpowernetworks.co.uk/internet/en/news-and-press/press-releases/Brixton-residents-first-in-UK-to-trial-smart-flexible-energyproject.html [Accessed 2 Aug. 2021].

SPACEMAKER: OVERPOPULATION | 31

Q&A Sheryl Owen Founder of 'Surrounded

by Opportunities'

How would you explain what SBO does to students unfamiliar with the construction industry?

There is a huge disconnect between contractors and what they can do to support ESG objectives. Frameworks that exist focus on design. In order for firms to meet their net-zero emission targets, we need to engage with contractors. 80-90% of emissions is related to contractors and the supply chain. Having worked in industry on greenhouse gas accounting on construction sites, it's all about keeping them informed about best practises.

How can we help with the decarbonisation of under-resourced communities?

It stems from an understanding of purpose. Are firms measuring by convenience or by impact? The role that it has in understanding how you're communicating with the supply chain, if you have net-zero goals are you setting thresholds early on in the proposal stage. Further, how do these align with current processes, and so they need to be adapted based on specific business units.

What has been the greatest takeaway from your work towards the Sustainable Development Goals?

Making sure that you have businessaligned key performance indicators, which is difficult at a micro level when the SDG's are at country level. I recently did a clubhouse on this subject, where I outlined how a firm I was working with wanted to do the most convenient action towards SDG 6.

The key is getting to the purpose of the SDG, exploring the supply chain and the community rather than purely a firm's outputs.

How hopeful are you for the future of sustainable construction in the commercial real estate sector?

There is a massive opportunity for the industry to step up. There is a lot of reliance on consultants to provide information who are brought in too late into the process: bidding complete, materials are already selected etc. Contractors need to be engaged with early on. There is a lot of movement in this space of engagement. Recently, I worked on a tunnel project where i had to do a top down greenhouse gas audit; conversations are being had but full integration is difficult to achieve.

How has Covid-19 impacted the sustainability push?

More conversations are being held.

Particularly for ventilation for buildings, which impacts energy efficiency and thus ESG reporting.

There is continual levelling up in this process. Further, social impact conversations are at the forefront.

However, with so many issues to resolve firms are being pulled in a number of directions - they must prioritise.

What has been the biggest challenge as a founder?

I've had to learn how to constantly pivot. Part of it for me is finding my purpose, working in consulting it is theoretical, but I found a preference towards practical work, which as individual is hard to act as all stakeholders well in business situations.

Would you have done anything differently?

Since starting my business, the value of business studies has become incredibly clear. I don't regret my engineering background, but it would be useful to get exposure to architectural firms, so you understand more of the overall process.

Sheryl Owen

Regardless of what you do, you will always be pivoting, so a lot of the time you need to solder through ambiguity which takes a broad skill-set.

Do you have any advice for current undergraduates keen to enter the space?

Networking is key, it never goes away.

You must develop relationships with people to succeed. While it is hard, it will always be a critical aspect. Also, be clear in what you want and don't be afraid to be clear in stating your expectations. The time that you realise something isn't right, don't be afraid to talk to people in other sectors to gather knowledge on the skillsets required to make that pivot. Often, in networking there is a lack of follow up, but this is fundamental in harnessing these relationships for the long-term.

Q&A | 33

INNOVATION

Gateway Bugs

The key to a sustainable diet?

By Arun William Jain Two of the world’s most principal concerns could be alleviated thanks to a new source of sustenance. From ants in Brazil to scorpions in Thailand, edible insects have been eaten in various forms worldwide for millennia. Yet, the idea has never truly caught on in Europe and North America due to numerous historical and cultural factors, ranging from climate to cultural taboos and negative associations. That could all be about to change as sustainably sourced edible insects have begun to crawl onto Western markets as consumers become increasingly conscious about the environmental effects of their food.

Thanks to globalisation and worldwide supply chains, we can eat food from all over the world, regardless of origin. The same is true in the insect industry where there is a wide variety of species and now, product types. The most popular insects include beetles, mealworms, ants, locusts, grasshoppers, and pond skaters. In the countries of their origin, the insects are fried and eaten as they appear, legs and all. This might not be so palatable to the uninitiated, so firms have come up with creative solutions. These now include insect protein powder, oil, protein bars and even sweets!

One company, attempting to change the narrative in the US is Chapul (Chapul,2021).

The environmentally conscious firm sees edible insects as the future and has begun offering protein bars and powder to US consumers. The firm hopes to not just be another fad that will fade over time and it the company has already earned itself a high-profile endorser, with Shark Tank’s Mark Cuban investing in the firm almost 10 years ago.

Food security is one of humanity’s gravest concerns, and protein is fundamental to maintaining a balanced diet. Even in wealthy countries such as the US, up to a third of adults do not reach the recommended daily intake of protein (Journal of Nutrition, Health & Aging, 2019). Edible insects offer an alternative that can pack a greater punch than most traditional meats. Studies vary wildly, one of the greatest challenges in estimating the nutritional impact is the sheer number of species suitable for human consumption, estimated to be 1,900 species (U.N. Food and Agriculture Organisation).

From such studies, it is estimated that species of adult grasshopper contain up to 28g of protein per 100g serving, compared with 26g for beef (Edible insects: future prospects for food and feed security, 2013).

Availability in Europe is growing thanks to deregulation in the market. Forecasts for industry growth vary greatly given the industry moving from occasional delicacy to commercial products. Worldwide, the market size was estimated at approximately $500 million in 2019 (Global Markets Insight, 2020). However, what is remarkable is the forecasted CAGR of the industry for the next 5+ years, ranging from 19.7% (Grand View Research, 2019) up to 47% (Global Markets Insight, 2019).

Translating to market size by 2026 of between $1.47bn to $5bn.

The principal concern of the sector is presenting edible insects as not just a meat alternative but a viable source in their own right. Despite these impressive growth forecasts, the market for beef in 2019 was $324bn. This shows the size of the incumbent markets and how relatively small the edible insect would be, even with the most optimistic of forecasts.

Furthermore, there remain some serious question marks regarding safety and regulations. The European Union has recently relaxed some of its rules surrounding insects, allowing frozen, dried and powder forms of locust onto markets.

However, there are strict regulations that must be maintained regarding rearing and selling that have hampered industry growth. As previously mentioned, there is such a breath of available insects that it will likely be a long time before many are tested and approved for public consumption. In an era of heightened concern for food standards considering tragic consequences that have followed allergic reactions.

Understandably, many consumers with specific dietary needs are sceptical about the introduction of an unknown food group.

Source: Oonincx and de Boer, 2012

GATEWAY BUGS: SUSTAINABLE DIETS | 34

INNOVATION Despite the above factors, there will be a need for new food sources in the future. By 2050, the world population is expected to be 9.8bn, up from the current 7.7bn. This is concerning and will have to be juggled with the planet’s environmental concerns. The rearing of livestock such as beef is highly resource intensive. By contrast, insects can be grown in a matter of weeks.

According to one insect producer in Israel, Dror Tamir, he claims that they “can breed 400 million locusts a year”.

He also suggests that compared with beef production, locust farming reduces greenhouse gas emissions by 99%, water consumption by 1,000 times and arable land usage 1,500-fold (BBC Business, 2021). If these claims are even half true, it would be a monumental leap forward in sustainable food production. At a time when 80% of global deforestation is on behalf of animal agriculture (Greenpeace USA, 2019).

The edible insect industry provides a glimpse into the food habits of the future. The industry has the potential to provide credible solutions to two of the most important challenges that humanity will face in the future. Whilst valid questions remain, which the industry must strive to answer, there is always uncertainty regarding the unknown. We must look positively towards this change if we are to truly adopt new sources of food and provide security to billions of people in the future.

References Lisbona, N., (2021). The edible insects coming to a supermarket near you. [online]. Bbc.com. Available at: https://www.bbc.com/news/business58636969 [accessed 17 October 2021] Whitworth, J., (2021). FAO highlights possible food safety issues with edible insects. [online]. Foodsafetynew.com, Available at https://www.foodsafetynews.com/2021/04/fao-highlights-possible-foodsafety-issues-with-edible-insects/ [accessed 18 October 2021] Jongema, Y., (2017). List of edible insects of the world. [online]. Wur.nl.

Available at: https://www.wur.nl/en/Research-Results/Chair-groups/PlantSciences/Laboratory-of-Entomology/Edible-insects/Worldwide-specieslist.htm [accessed 18 October 2021] Chapul. (2021). About us. [online]. Chapul.com. Available at https://chapul.com/pages/about-us-1 [accessed 1 November 2021] Mordor Intelligence. (2021). Edible Insects market size, growth analysis segmented by insect type. [online]. MordorIntelligence.com. Available at https://www.mordorintelligence.com/industry-reports/edible-insects-market [accessed 1 November 2021]

GATEWAY BUGS: SUSTAINABLE DIETS | 35

INNOVATION

Turning emissions into value Pond Tech's mission - our future

By Yusof Hassan Carbon emissions are on the rise and there’s nothing new about this statement, as emissions have been climbing since the 1800s (“The World Counts” 2021). However, with emissions totalling over 40 billion tons in 2021 alone, significant action needs to be taken to reduce this number by a substantial amount.

Despite the efforts made by a multitude of industries to garner attention towards the issue, emissions aren’t slowing down, so—what’s the solution? Innovation lies at the epicentre of battling this issue once and for all, and a company that is making strides in this field is Pond Tech. This company strives to innovate CO2 abatement technology, which aims to convert industrial CO2 emissions into biomass and algae products. This article will delve into the benefits of Pond Tech’s innovations alongside looking into the commercial side of climate change.

Firstly, let’s take a more in-depth look into what pond-tech does—their aim is to use algae to bridge the gap between non-renewable and renewable resources.

Algae is a historically foundational element of oil and gas reserves and can be used to absorb untreated CO2 emissions. Utilising the broad capabilities algae possesses will be disruptive to a multitude of industries.

For example, as opposed to recreational protein, 1,000 tonnes of algae will allow for the production of enough sustainable protein to feed around 35,000 people for an entire year. Not only do these figures show us the impact that algae can have on a smaller scale, but it also shows us the potential that algae holds in being able to turn a global issue on its head, to make a better, more sustainable future.

However, it doesn’t stop there. The algae used in the bioreactor, once harvested and cultivated, can be upgraded and used for beneficial purposes such as nutraceuticals. Utilising algae to consume, and thereby ‘clean’ untreated emissions, is enough of a selling point —but couple this with the fact that there are zero byproducts associated with the process are wasted, and Pond Tech’s innovation gets even more intriguing.

Unsurprisingly, Pond Tech is not the first company to attempt using algae farms. So, why are they special? A 2017 paper published by the US Department of Energy looked into the cultivation and use of algae farms for sustainable bioenergy (Orlando 2017). Although noting the potential benefits of this, they experienced problems with the economics of the system. Within the department’s Algae Carbon Capture and Utilisation system, there were three parts: 1. CO2 capture 2. Delivery of this to algae farms 3. Further utilisation of the algae They identified logistical and economic problems with each step. With the first, there was the serious concern of contamination in the emissions that could be toxic if used in the production of nutraceuticals. With the second, costs of delivery seemed to be a key issue. The construction of pipelines would be an unattractively costly step. And thirdly, one of the main problems is related to the scalability of the process. They estimated that the size of farms needed to make a genuine impact would be far too large. Pond Tech is unique as it addresses the majority of these concerns with its patented innovations. Its bioreactors can be attached to the industrial facilities, resulting in zero requirements for deliveries. It automatically regulates the inflow of CO2, meaning it also requires minimal manual supervision. Its main selling point, however, is its scalability. Through its patented technology, Pond Tech has managed to trim the size of the process to a fraction of the expected size.

This introduces us to a less-spoken about area of innovation in the climate fight: the market. The growing attention on climate solutions wears the guise of a social issue but has an ever-present, underlying focus on markets and profits. In order to shift global positions on industrial emissions, we need to convince the industries and those that regulate them. Markets are more important to innovation than it seems, and Pond Tech wins in this department too. Its process is cost-effective and creates a sustainable market of biomass products. Pond Tech is making combating climate change profitable.

POND TECH: EMISSIONS INTO VALUE | 36

However, to assume that Pond Tech is going to be our reigning saviour in the fight against global warming isn’t correct either. The innovation that this company contributes in this fight is of colossal benefit, however, it too, has its drawbacks. Is it possible that a company whose aim is to absorb industrial emissions will make businesses complacent in reaching their green energy goals? Although Pond Tech’s goal is to help ease the transfer from non-renewable to renewable resources, could Pond Tech be seen as a crutch to continue the use of our finite resources instead?

With growing attention surrounding the company, we may see the effects of Pond Tech sooner than other energy companies and processes that, in comparison, are still in the early test stages. Pond Tech is continuously innovating and improving on its own designs in order to help combat climate change. They are also a good display of the importance of the market mechanism, even in global social issues such as climate change. Because of its ease and cost-effectiveness—not to mention the fact that it requires no inherent decrease in industries’ emissions—it is an attractive endeavour to finance and explore. We can see in Pond Tech’s success thus far, that this profitable attraction has allowed them to rise more rapidly in the market, and therefore have more immediate effects on climate change. This market-oriented view, however, also leads to complacency amongst industries that might use this to prolong their current usage of harmful resources.

Although, with the right regulations and industry standards, this should not demean Pond Tech’s innovations. Pond Tech is deriving value from emissions and making the fight against climate change profitable.

References “The World Counts.” 2021. Theworldcounts.com. 2021. https://www.theworldcounts.com/challenges/climate-change/globalwarming/global-co2-emissions/story.

Orlando, Florida. 2017. “Algae Cultivation for Carbon Capture and Utilization Workshop Summary Report.” https://www.energy.gov/sites/prod/files/2017/09/f37/algae_cultivation_ for_carbon_capture_and_utilization_workshop.pdf.

POND TECH: EMISSIONS INTO VALUE | 37

INNOVATION

Loop: Reusable Packaging to Replace Waste Plastic

By Oliver Jeffries

According to a 2019 YouGov survey, 46% of people in the UK feel guilty about their plastic use, with a further 82% stating that they were actively trying to cut down their plastic waste.

Experts believe that around 800,000 tonnes of plastic are created by supermarkets in the UK every year, with only 52% being classed as ‘easily recyclable’. As a result, supermarkets are coming up with new ways to cut down on the vast amounts of non-recyclable plastics which leave their shelves every year.

A firm called Loop has partnered with Tesco’s, the UK’s largest supermarket, to try and combat this issue through reusable supermarket packaging. Loop states on their website that they envision a ‘transformative circular economy that reduces our global reliance on single-use disposables’.

Such a partnership certainly seems like a step in the right direction if we are to tackle our single-use plastic dependence in this country. But questions around cost, logistics and ease of use could still prevent the idea from catching on.

How does it work?

Consumers take the Loop branded products to checkout, as they would with any usual item. They are then charged a 20p deposit fee for the cost of the reusable packaging the product comes in. Once they have used whatever product was contained within the reusable packaging, they return their packaging to a collection point, after which they are refunded their deposit through an app. Their packaging is then refilled and added back to shelves, resulting in no plastic waste at all!

Practicality

However, with this initiative, the alterations to behaviour seem trivial given the large difference it could make to plastic waste reduction. The deposit is relatively small, and the dropoff process is quick, simple and doesn’t require any additional journeys to and from the supermarket.

Support from Business If we are to transition away from our reliance on single-use plastic in our supermarkets, action from the supermarkets themselves is critical.

Each year, Greenpeace, release a 'Supermarket Plastic League table’ in collaboration with the Environmental investigation agency to demonstrate to what extent each supermarket chain is doing its bit to help combat plastic waste in are the stores UK. such as On the more positive end of the scale Waitrose who currently have 86% of their name-branded products made from reusable or widely recycled materials and are aiming for this number to become 100% by 2023.

Conversely, stores such as Iceland have seen an increase in the amount of branded plastic they use and post the highest plastic use per unit of market share of any major retailer.

If the UK is to see its supermarkets become more sustainable, market leaders must pave the way to demonstrate that environmentally friendly packaging can be produced without incurring a large increase in costs.

Additionally, there is an onus on producers of goods to partner with supermarkets to have their products repackaged in reusable containers. BrewDog, the UK based beer firm are a perfect example of a company committed to helping battle single-use plastic and climate. In 2020 the firm went carbon negative and have also been one of the firms who subscribed to Loop and Tesco’s initiative. Without support from suppliers to supermarkets, the success of reusable packaging could be significantly reduced.

The usability with this initiative is crucial to its success. Despite the apparent public support to move away from single-use plastic, altering people’s shopping habits could prove challenging.

LOOP: PLASTIC WASTE | 38

INNOVATION

Conclusion This new initiative is a promising partnership that should help guide other smaller supermarkets to venture into reusable packaging solutions to our plastic waste crisis, as well as do some good for the reduction of plastic waste for Tesco itself. Much of the future success of the technology depends on the continued support of consumers, retailers, and governments to ensure that we alter our behaviour to combat the crisis of single-use plastic plaguing our shop shelves.

References Waldersee, V. (2019). Most Brits support ban on harmful plastic packaging. [online] Yougov.co.uk.

Available at: https://yougov.co.uk/topics/consumer/articlesreports/2019/04/19/most-brits-support-ban-harmfulplastic-packaging.

Which? (n.d.). What are supermarkets doing about plastic? [online] Available at: https://www.which.co.uk/reviews/shoppingsustainably/article/what-are-supermarkets-doingabout-plastic-

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Sustainable Business Review, 2020. Published November 2021.