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