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Big picture: Every influential organization and leader around the world (besides Trump) is telling us to Build Back Better. What are we trying to fix?
A little context: History shows how major global resets can fail poorer nations. Bretton Woods perpetuated inequality behind the veil of humanitarian activism. If the status quo changes the status quo, did the status quo really change?
Some talking points:
- Governments caused the COVID debacle, not the people. Yet, the people face the consequences.
- Governments (and international organizations), perpetrators of the broken system, want to fix it.
- Suggestions from big orgs are abstract and ambiguous, rather than tangible like term limits.
Bottom line: As we watch world leaders discuss recovery options, let’s prioritize tangible change rather than utopian fantasies.
Dig deeper → 2 min
The scoop: the IMF published a statement calling the pandemic recovery plan a ‘new Bretton Woods moment’.
What is Bretton Woods? Bretton Woods was an international conference that took place in 1944 with the goal of preventing another World War by establishing a new international monetary framework.
The legacy of Bretton Woods: Although the agreement no longer serves a purpose in the modern world, its effects are still being felt; there is more negotiation between nations both economically and politically and the global market is more interconnected than ever before.
Lessons for coronavirus, globalization:
1. Make politics people-oriented
Leaders and policy-makers of international organizations are motivated by self-interest and private sector pressure. Likewise, they propose policies that favor private interest and hurt the average worker.
2. Make international finance fair and equal
Loan conditionalities from the IMF are often attached without serious consideration for the interest of the borrowing nation or its citizens. Recommendations by the World Bank and IMF don't always resolve economic hardships for developing nations.
Bottom line: If this is a new Bretton Woods moment, perhaps we can learn a thing or two about our convoluted past of international do-good. Rather than just hit the reset button, we should consider how poverty alleviation requires more than a paycheck.
Dig deeper → 8 min
The scoop: Last week, Ripple’s CEO made an ambitious commitment to go carbon net-zero by 2030 in collaboration with conservation Rocky Mountain Institute and REBA, and pressured other crypto companies to do the same.
- Unlike Bitcoin, Ripple (XRP) was built with a finite supply (100 billion) at its inception, making it easier to control mining activities and mitigate its environmental footprint.
- Compared to Bitcoin’s 4.51 billion lightbulb hours needed to mine it, the XRP Ledger uses just 79,000.
- A lot needs to happen to make do on that claim, but Ripple is the first crypto looking to go carbon net-zero, and they have a plan (see below).
Bottom line: I don’t know if Ripple, Ethereum, and Bitcoin will one day replace Euros, Dollars and Yuan. With that said, why not bet a dollar on the possibility that they one day could?
Dig deeper → 3 min.
The International Energy Agency (IEA) rolled out its annual World Energy Outlook report with a bombshell. Solar power is expected to replace coal as the #1 source of energy production by 2025.
The backstory: In the last few years, governments and corporations flooded billions of dollars into the renewable energy space. Wind & solar energy have become cheaper than gas & oil as a result. It is now easier to manufacture and install solar panels than ever before.
By the numbers:
- The IEA thinks 80% of new power generation will come from renewables.
- We need to boost up investment in the energy grid by at least $460 billion in 2030 to hit our goals.
- The global economy will return to pre-covid levels in 2021, but 7% smaller over long term compared to 2019 projections.
Between the lines: China alone will account for 40% of global growth for electricity demand over the next ten years. Southeast Asia and Africa will see major demand increases for energy over the next few decades.
Meanwhile, IEA's report found that global CO2 emissions will not return to 2019 levels until 2027, due to energy mix with renewables and coal's big drop in 2020.
Zoom out: We need a structural transformation of the global energy sector to hit on sdg's (those UN-sanctioned green goals we keep talking about), and that requires a lot of clean capital stock.
The report makes it clear that low growth of emissions ≠ a climate change solution. It's a means to an end.
Bottom line: Solar will replace coal as king sometime this decade.
Dig deeper → <2 min
The scoop: The world uses a lot of materials to produce a lot of waste.
By the numbers:
- Asia accounts for 60% of mineral extraction and 67% of freshwater use.
- The world disperses 28.7 billion tons of fossil fuels and biomass energy.
- Europe, Asia and N. America account for 78% of fossil fuel output.
- It takes <resources to produce >materials.
- A lot of freshwater, an increasingly scarce resource, turns into wastewater every year.
- Most raw materials and natural resources end up in the land, air or water.
Bottom line: The current production process outweighs Earth's production capacity. To solve that, we need to maximize the life-cycle of products, treat natural resources carefully, and minimize waste.
Dig deeper → <1 min.
The scoop: In 2018, global risk firm Verisk combined UN population data with their Climate Change Vulnerability Index (CCVI) and found that 84 of the 100 fastest growing cities in the world face 'extreme risk' from climate change. The remaining 14 faced fell under the 'high risk' categories.
By the numbers:
- 95% of the 234 cities most affected by climate change fall in Africa & Asia.
- 86% of the 292 'low risk' cities are located in Europe and the Americas
Between the lines:
- The world's poorest with higher rates of urbanization = face greatest threats from climate disruption.
- The world's most advanced economies (US, China, India, Europe) account for half of the world's carbon emissions.
- The International Monetary Fund estimates that 8 out of the 10 fastest growing economies between 2018 and 2023 will be African countries, posing serious risk to companies operating in the region.
Bottom line: There is a clear correlation between climate change vulnerability and population growth. This is occurring in the fast growing economic region of the world, making an even stronger case to invest in climate resilience. Secondly, advanced economies (as the cause but not the victim) have a moral, social and economic responsibility to mitigate the impact of carbon emissions.
The scoop A new stock exchange was approved by the SEC in 2019. It focuses on long-term sustainability. We thought it demanded more PR.
Things to know
- 87% of executives and directors feel most pressured to demonstrate strong financial performance within two years.
- If all US companies had employed long-term strategies, they would have added
- $1 trillion to U.S. GDP
- Five million jobs between 2001 and 2015
- Economic earnings for long-term firms grew on average 81% more than other firms.
Long Term Stock Exchange was founded by Eric Ries after an international tour for his NYT best-seller Lean Startup. The stock exchange uses principles-based listing standards for new companies.
Bottom line In a time in which we face unprecedented and urgent long-term problems such as climate change, racial injustice, and the threat of epidemics, it is crucial that our infrastructure supports the long-term solutions needed to tackle such complex problems.
Dig deeper → 4 min
The scoop BlackRock’s Larry Fink warns CEOs that the risks associated with climate change will compromise returns without reallocation of capitol, calling for potentially the biggest divestment in finance history.
Why it matters BlackRock, the world’s largest asset manager, pledges to divest from fossil fuels and coal, increase investment transparency, and promote firm accountability throughout their sustainable transition.
Bottom line Though his letter is a step in the right direction, it merely foreshadows the significant changes yet to come. Executives will either embrace innovation today or be overshadowed by forward-thinking leaders.
Dig deeper → 3 min
The scoop The price of crude oil plummeted following the outbreak of the novel COVID-19. As 2020 began, Brent crude oil - the global oil benchmark - cost $64/barrel. By April 21st, 2020, the price had dropped to $17/barrel. What happened?
Future of Oil
- The volatility and steep decline in oil prices may lead some producers to shut down operations. Shale oil extraction pioneer Chesapeake Energy recently declared bankruptcy. Many oil giants are delaying expansion projects.
- Investors are now less inclined to invest in oil & gas -- lower prices = greater risk, less profit. Energy was the worst performing sector in the S&P 500 index for four out of the last six years.
Environmental impact Climate awareness already poses a threat to Big Oil. With this economic crisis, investors might turn to renewable energy. Renewables are more price stable, cheap, and cost-competitive, even during low prices of oil.
Bottom line It’s impossible to predict the future. Big Oil will certainly survive the pandemic, but its century-long domination of energy may soon end. One thing’s for sure -- clean technology has a strong outlook, and can certainly give oil and gas companies a run for their money. Not only from its greenness, but also in its economics.
Dig deeper → 3 min
What to know Sustainable investing allows you to implement your core values while increasing your profits. ETFs, Index Funds, and Roboadvisors are a good place to start.
Four main approaches
- Exclusionary screening - avoiding investment in companies or sectors that do not align with investor values.
- ESG integration - rating companies based on their implementation of Environmental, Social and Governance principles.
- Thematic investing - focusing investments according to interest in specific themes, for example clean energy.
- Impact investing - investing in companies or funds with the intention of generating impact alongside a financial return.
Bottom line -- Sustainable investing not only offers you a way to invest according to your values, but it also provides good financial performance and potential risk mitigation.
Dig deeper —> 5 min