Climate Summit in Bonn – the 23rd UN Climate Change Conference is behind us, with the next chapter of the story due to be written in Katowice, Poland in 2018. The outcome of the gargantuan round of consultations is a detailed, and in many respects somewhat non-committal final document with which all parties have said they were more or less satisfied. Despite the official exit of the US from the Paris Climate Agreement, there was a self-assured appearance by the anti-Trump “We are still in” coalition, so there is hope that the US may reconsider its withdrawal.
Key results of the Climate Conference in Bonn
Expert groups and working conferences are to prepare a several-hundred-page rule book over the coming months, refining it into something individual countries can use. This text is then to become part of international law.
Developing countries have failed in their attempt to make the industrialised nations responsible – and financially liable – for harm caused by crop failures, droughts and floods. There was agreement, however, in the dispute over the funding of climate protection measures, with the industrialized nations holding to the commitments they had made before Paris. In addition, a system called the “Talanoa Dialogue”, chaired by Poland and Fiji, was agreed to review the effectiveness of climate action. Initial results are expected in time for Katowice.
Somewhat on the margins, an alliance was formed by 19 countries under the leadership of Canada and the United Kingdom, which wants to stop using coal by 2030. One controversial aspect is that the majority of the countries that have joined the alliance rely heavily on nuclear power. Germany is not among the 19 founding members of the alliance.
The growing energy market – many unanswered questions
The Internet of Things, E‑mobility, smart cities, smart homes, growth and resultant rising expectations across the world are causing energy demand to skyrocket. On the supply side, the result is huge amount of opportunity, but also a multitude of risks because one question still remains unanswered: what resources are we going to use to generate tomorrow’s energy as efficiently and economically as we can, and above all without harming the ecology of our environment and the planet we all share?
What is clear is that fossil fuels are set to be a thing of the past, and that nuclear power cannot yet be reliably controlled. Solar, wind and water power are still competing with each other, and it has to be said that subsidies and disincentives are distorting competition to a degree. There are also still many questions surrounding storage and availability during peak demand. A sensible mix of all renewable sources is certainly the best way forward here. It is becoming increasingly clear that hydropower not only has the highest levels of efficiency and efficiency, but also offers constant availability and, in the case of small distributed hydropower plants, the best cost-benefit ratio.
Corporate commitments, confused consumers
Many years ago, the Global Reporting Initiative (GRI) in Amsterdam was created as a means of reviewing and evaluating companies with regard to their ecological, social and ethical conduct. The public debate and the evidence of climatic changes have led to a shift in the consumer mindset. Whereas attributes like dynamism, dominance, sportiness and luxury used to rank high on the list of preferred brand values, environmental, social and ethical aspects today weigh more strongly on the minds of consumers when making purchasing decisions.
This is forcing not only global brands, but also small and medium-sized enterprises to rethink their marketing communications, adapting their processes and marcom strategies accordingly. No business can afford to be associated with corruption, child labour, discrimination or environmentally harmful production processes. Automotive, chemical and food companies were the first to respond, and meanwhile nearly all relevant brands publish CSR reports and are GRI-certified to varying degrees.
Businesses in the public eye
The financial sector, too, has tackled the problem, not only as a supplier of financial services but also, on the demand side, as a “consumer” of investment opportunities offering future promise and healthy risk-return profiles. A tiny incident – be it for ethical or environmental reasons – can cause millions of dollars of losses, damage trust and confidence long-term, and cause brand value to evaporate. The food industry is especially vulnerable in this respect. Some time ago, when a rat was spotted behind the cheese counter of a well-known discounter’s store, it initially sounded like a bad joke. What ensued, however, was every retailer’s nightmare. It took a lot of time-consuming crisis management and PR to restore confidence. The diesel scandal is perhaps a more high-profile example of just how important ecology, ethics and social behaviour are to business success and shareholder value. As one would expect, industries like the energy sector and the chemicals business are especially in the limelight in this regard.
The unsettled investor
The decisions of private and institutional investors have followed suit and are increasingly taking these aspects into account. A major company without GRI certification or with a poor financial sector ranking is avoided and finds it difficult (i.e. expensive) to obtain finance.
Evaluations are difficult when it comes to investing in power generation. Few, if any, will invest seriously in lignite these days, but even when investing in renewable energies many questions transpire. Subsidies, feed-in tariffs, political risks, storage and constant, reliable availability are just some of the criteria here.
Our next blog will look at green investments, green bonds and the possibilities of a reliable green ranking system.
With kind regards,
The Aliquantum Team