Race to de carbonization: Convergence to financial goals is the key

The iconic global company, British Petroleum (BP) made a very interesting move recently by selling off its coveted petrochemicals business and opting to play only in the energy businesses – oil and gas.

In its Q2`20 results announcement, BP`s strategy statement under its new CEO, says that it will reshape BP`s business as it pivots, from being an international oil company focused on producing resources, to an integrated energy company focused on delivering solutions for customers. 

In pursuit of its new strategy, BP aims to reduce it oil and gas output, in the next 10 years, by 40% from the present levels, with emphasis on low carbon technologies especially on renewables - bioenergy, hydrogen and on CCUS (Carbon capture, utilization and storage). Clearly BP is moving towards the global wave towards greener world and sustainability, with the better stock market valuations as the key objective.

Similarly, the other global oil major Shell has also announced similar moves to a zero carbon future as a part of its “Our response to Climate Change” report and is moving on the same lines as BP.

Stakeholders on common platform – boost for sustainability initiatives

Sustainability and climate change has become an integral strategy of all the global firms, especially in the energy and downstream area, thanks to public pressure as well as due to sustained efforts of think tanks and activist organizations like Greenpeace. 

In fact, unlike the past when the global firms were reluctant to engage with the pressure groups, there is an increasing acceptance by the global firms to engage and shape their sustainability strategies with activists like Greenpeace.

Recently, in a virtual discussion forum shared by Shell, Greenpeace and Green Alliance[1], the convergence was very visible with the statements of the senior executives of these 3 organizations. The welcome sign, that was very evident, was a rising acceptance to work together to achieve climate actions goals. 

Gone is the acerbity that used to cloud such discussions and debates in the past.

Higher financial returns for sustainability investments

Environment, Social and Governance (ESG) investing has taken a big leap in the last few years and the trend has been given a further boost especially with the recent Covid pandemic. 

Data published recently by FE analytics show that in the last 3 years, socially responsible investments have generated about 7% more returns as compared to benchmark indices and about 11% more returns than non-socially responsible investments. 

Global investments in socially responsible assets is at present estimated to be at about $45 trillion as per a JP Morgan report.

 

Green bonds – huge inflows in last few years

Green bonds, which raise money for climate and environment projects, had a very slow start when they were first launched in the year 2007. However, in the last few years, green bonds in various forms have seen a huge interest with about $258 bn of investments in the year 2019 – a 51% increase on a year on year basis.

As per Morgan Stanley Capital Index, about 70% of the green bonds issuance are in alternative energy (38%), green buildings (17%) and sustainable transport (15%). Renewables energy has accounted for a bulk of the alternative energy investments over the last few years. 

Thus, the rise and convergence of financial incentives to the environment and social aspirations of all stakeholders, has led to a change in approach, thinking and business strategies in the last few years towards decarbonization and environmental goals.

What are the incentives for all the stakeholders ? 

Global firms see better market valuations, government authorities visualize lower pollution and emissions while activists, like Greenpeace, gain more traction and funding with their contributions for global wellbeing.   

  

What can be done in India?

India, like any developing country, is faced with a dilemma of balancing development vs environmental concerns. Like China, India too is plagued by issues like high air and water pollution, some of which can be attributed to the high usage of fossil fuels like coal, diesel, etc. 

Some of the initiatives that can be pursued by the Indian authorities:

1. Alternate Fuels :  Push towards cleaner sources of energy needs to be incentivized for greater penetration. The shift towards solar power was given a boost with the financial incentives to the producers. Installation costs crashed by about 80% between 2010 and 2019 which helped Indian capacity to about 31GW from 2.6 GW in 2015. Indian solar power prices, at present, are estimated to be one of the lowest in the world. Hence, the government needs to continue such an approach not only to solar power but also to other alternative energy sources.
2. Electric vehicles (EV`s), have been sustained in the western nations, with government incentives. Charging stations are required for higher penetration of EV`s. Indian government needs handhold the auto industry to manage the transition to EV`s through tax breaks especially support the charging station infrastructure development.
3. Incentivize companies to reduce carbon footprint with regular audits and tax breaks to support such initiatives.
4. Hydrogen as a clean fuel is being actively pursued in China and other western nations. India can adopt hydrogen quickly and leapfrog in its adoption. 

     

   

 

 Convergence of financial and aspiration goals is important to make any sustainability, climate action and environmental initiatives work by making it an economically sustainable model.The recent global shift in this direction is an encouraging move which will lead to benefits for the global society as whole.

         Let’s hope for the best!

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[1] Posted on the website Thinkunthink : https://www.thinkunthink.org/latest-unthinking/2020-07-28-oil-giants-and-sustainability-campaigners-the-new-common-cause

My tryst with Himalayas and Climate Change

#sustainability, #climatechange, #environment, #annapurnabasecamp, #himalayas, #pollution, #reuse, #recycle, #reduce,#circulareconomy #Nepal, #Nepaltourism, #gretathurnberg

Last month myself, my wife Vani Narayanan and other friends from my running group in Mumbai, experienced the beauty and freshness of the Himalayas by trekking up to the Annapurna Base Camp (ABC). Over a period of 8 days- 5 days to climb up till ABC and 3 days to climb down, our enthusiastic team scaled an elevation of 4,100m and trekked close to 100kms with steep climbs up along narrow, rocky and muddy but pristine paths laced with breath-taking views of the Himalayas with stunning views of the various peaks like the Annapurna, Macchapuchare and Himchuli. The journey started from Pokhara (Elevation: 1,400m)- Ghandruk (1,940m) – Chumrong (2,040m)- Bamboo (2,190m) -Deurali (3,280m) and finally Annapurna Base Camp (4,100m).

 A breathtaking experience in the mountains....

The trudge in the mountains were inundated with various walks through clouds and splashes along mountain streams with spring fresh water and being treated to the various fresh local cuisines along the way.

For most of us used to staying in 5-star hotels across the world we had overnight stays in various tea houses with minimalistic facilities like cramped rooms for 3 people, common bathrooms, Rs. 200 paid hot shower, no TV, no free WIFI, limited mobile connectivity etc.

As we could carry only limited items due to weight restrictions all of us learnt the values of minimalistic living like reusing clothes for several days, washing and drying clothes overnight under mattresses and sleeping bags, reuse plastic covers, one shower per day, sharing our battery packs for charging our cameras as charging mobiles, etc. was a paid affair, etc. Importantly, instead of buying all our trekking material many of us borrowed from our ever-helping trekking friends’ networks - like bags, jackets, etc. or leased it from a mountaineering shop.

..Laced with some eye opening and humbling experiences

We all huffed and puffed carrying our 5-6 kg day packs along the route but our bags weighing about 10-12kgs were carried by the local porters who could carry about 2 bags each and walk at such a pace that they would reach the destinations well before we all did! Another eye-opening experience that we saw was that all material like some food material, fuel, construction material to the people, houses at the top of the mountains were carried by the local porters with many sights during our trek of these porters carrying LPG cylinders, steel rods, house doors weighing up to 20 kgs on their backs.

A humbling experience indeed for all of us who are used to all facilities and luxuries in life but, yet we complain about many things!! 

Global events in the background

As we were lost in the natural beauty of the Himalayas, at the he same time many events with sustainability and environment issues as the core occurred in the world. The UN climate conference debated the effects of climate change, marked By Greta Thurnberg` s emotional outburst, in which the usual issues of developed vs developing nations clashed with no clear solutions. The Indian government announced a roadmap to weed out single use plastic by 2022 to address the plastics pollutions issue and closer home we Mumbaikars saw the horrible spectacle of trees being cut down in Aarey forest – one of the lungs of Mumbai- overnight to make way for a metro rail shed.

Can mountain people preach climate change?

Obviously, the debate will go on to balance the needs of development to meet the ever-growing needs of people as against the menace due to the unbridled development leading to environmental issues, pollution, etc. which can affect the long-term sustainable development. I reflected to our learnings from the Himalayas trek to check whether these learnings can be applied to our “luxurious” day to day life styles.

Can the sustainability concepts, on which the life style of the people living in the mountains like Himalayas are based, and which our team embraced during the ABC trek – Reduce, Reuse and Recycle be embedded in the mind sets of the people across the world address the climate change and environmental issues?

My gut feel says yes!

What can we people do?

The recent backlash in support of environmental and sustainability issues indicates that this process might have started. Instead of having clothes for many single usage occasions can we all live with clothes just for our utility use and limited other usages and borrow clothes for special occasions? Many of us who spend all our working days in air-conditioned offices, cars, etc. – can we use our clothes more than once before washing and hence saving water usage, soap, power, etc.? Sharing platforms like Uber, Lyft and Ola have shown that we don’t need to own cars to commute. Recycled clothing, even for active sportswear, have been proved to be very similar to clothing made from virgin material from a utility and design perspective. Usage of recycled plastics in roads have proved to be very effective to lay durable roads.

Economic theories driving this change in consumer behavior?

Milton Friedman, the guru of consumption economics, propounded his Nobel Award winning theory of consumption economics in the 1970`s which drove the booming economies of the western world. However, the latest theories of “Sustainability” and “Circular Economy” propagate the perils of unabashed consumerism on the economies and hence highlight prudent consumerism. In short, these concepts highlight that the goods made are resent back to their roots for sustainable solutions and hence leave lesser footprints. If we use the same items more times, reuse and recycle like the people living in mountains do it would lead to a prudent usage of virgin material and hence prudent usage of water, power, fuels, etc. and hence lesser environmental issues and pollution issues and hence lesser climate change issues!

Thus, every policy maker dealing with climate change and environmental issues need to look up to people living in inclement conditions like the people in mountains and look up to them to address the environment issues. Hence at the next UN climate change summit, instead of listening to emotional and content less speeches like the one made by Greta Thurnberg, the organizers would be better off by inviting mountaineers and people living in mountains to speak!!!

Hail Mountains!! Hail Himalayas!!