State of the Planet 2006

State of the Planet 06
Is Sustainable Development Feasible?

DAY ONE

The context of this conference is the question, is sustainable development feasible? We must situate all of our discussion today in the domain of intellectual organization and specialization, and against a backdrop of the cultural and environmental issues associated with sustainability and development.

Jeff Sachs, the world’s homeboy

Is sustainable development feasible?
Sustainable = environmental sustainability
Development = improved material conditions = food, water, shelter, transport, consumption → things we consume, the policies we need to address, fix, modify and translate for the 5/6 of the world that live far worse than the 1/6 rich (in US, Europe, Japan, Singapore and Israel).

We’re nowhere near sustainable development!
There’s been some economic improvement in some developing countries, where – and don’t be too shocked – money can buy happiness! In fact development is happening quite rapidly in half the world, that is, Asia, but not in the poorest of poor countries. In the latter we are experiencing:
• Worsening economic conditions
• Spread of hunger, famine, disease
• Rising child mortality
• Decreasing life expectancy
Remember, we’re ALREADY environmentally unsustainable; current global levels of technology and economic activity are RUINOUS! Extreme poverty is characterized by
• Fastest population growth
• Bases of terror, instability, conflict, violence
• Massive land degradation
So ending the 800 million people in extreme poverty WILL help environmental sustainability – it’s a win-win situation! Once that threat of poverty is lifted from their lives, they will cut down less trees for firewood and misuse less long-term resources (like land) to sustain themselves in the short-term. Helping the poor is NOT a deviation from the MDGs. Its NOT part of our global environmental challenge, since their resource consumption is THAT low! In fact, if all 800 million of them were moved up to middle income status, the earth would experience:
• 4% increase in world economic activity (that’s it!!)
• 6% increase in CO2 emission
• increase from 46- 67 years in life expectancy
• decrease from 183 to 60 per 1000 children deaths per year
• decrease from 71% – 17% fuelwood and other biomass use
• decrease from 6 – 2.5 children per household
These are all positive security, humanity and sustainability ramifications! There will then be considerable complementary development in the US, Asia, Europe, etc.

Every single major ecosystem on the planet is under threat.
• Darfur is, first and foremost, an ecological crisis! Insufficient water for sedentary communities leads to violence and conflict. And it will get worse as natural resources and physical earth systems are further depleted and abused:
• Fisheries are collapsing everywhere
• Massive species extinction going on
• Loss of land and soils
• Massive changes in chemical flux – nitrogen-fixing fertilizers are dominating atmospheric (natural) nitrogen cycles
• Climate change = temperature, humidity, precipitation, carbon fluxes (and subsequently the acidification of oceans)
• Pathogens and their zoanotic nature, ie, arising out of human interaction with animal disease → anthropogenic causes

• Current average world income per capita = $18K
• Current average US income per capita = $40K
• UN estimates world population of 9 billion by 2050, but 7.5 million would be preferable (and we’re SUPPRESSING family planning in America right now? Way to go, Bush!)

Technological solutions for energy, food, health and ecological management:
• The good news: we are not going to run out of fossil fuels for centuries!
• The bad news: we are not going to run out of fossil fuels for centuries!
• There’s been a loss of marine and terrestrial habitat due to increased food production, so we’re thinking about aquaculture. This method is still being developed, so its still environmentally hazardous (putting pollutants into the ocean).

Politics
• The basic politics today is that we have NO politics on these issues! We are fighting all the wrong wars in this country! Realize that sustainable development WILL dominate our geopolitics when resources grow scarce and borders more instable.
• The White House needs a subscription to Scientific American
• The earth is facing scientific problems that need scientific improvements, not just clear thinking and goodwill. The White House is scientifically innocent and antagonistic. It can’t absorb the science yet, its not equipped or trained to be an interface between science and policy, yet such a linkage is crucial to saving this planet.
• There is no such thing as a superpower or sole superpower anymore. These are global scale problems, too. The US can’t “lead” these discussions alone anymore – in fact right now she’s absented herself from the global cooperation that is desperately needed. New politics must be implemented, that is more networked and multi-sector based.
• We need more systematic stewardship for the future, policy decisions that DO factor in consequences for future generations. The ‘commons’ of the oceans, atmosphere, biodiversity etc do NOT belong to one country. They can’t, that’s nonsensical. They are part of a global commons that we must learn to manage more efficiently and respectfully. Sustainable development requires a sound and manageable population, and similar policies.

Ismail Serageldin, Director, Library of Alexandria in Egypt
“I’m an incurable optimist on a number of things!”

Technology
• I’m concerned about how we’re prioritizing our technological abilities – new sciences CAN help, but only if we use and appropriate them wisely.
• Research and ingenuity = science and technology.
• We’ve produced more information in the past 30 years than we have in the past 5000!
• Key is to convert information into knowledge, into wisdom, after filtering out all the contradictions, misinformation and media-inspired fallacies from the first sets of data.
• A potential goal: connect 50% of the world over some interface by 2015. (“50 by 15”)
• Rich country residents earn 40 times higher income than poor country residents; rich countries spend 220 times as much on research per capita than poor countries.

Bruntland Commission definition of sustainable development = to meet the needs of the present without compromising the ability of future generations to meet their own needs → this is impossible to operationalize! Let’s break it down to:

Economic + Social + Ecological components
Man made K + Human&Social K + Natural K [K = capital]
(Buildings, roads) + (That which holds societies together) + Ecosystems
Dato Lee Yee-Cheong – Science, Technology and Innovation (STI)

STI did contribute to the betterment of the human condition in the 20th century, but in fact 2/3 of humankind is yet to benefit → thus the MDGs were born
There are UN Task Forces to address all of the 8 MDGs. UN Task Force 10 focuses on STI: furthering development; promoting environmentally-friendly policy; forging regional and international partnerships.

Developing countries need
• Small and Medium Enterprises (SMEs)
• Basic infrastructure
• Upscaled macroeconomic stability – since it takes time to train teachers, build clinics
• Self-reliance
• Self-confidence
• Hard work
• Education – urgent action should be focused on human capital (since other K might be lacking) – we need stronger universities, and help from universities in developed countries
• Thrift

Education
Science, per se, does not create wealth. It must be translated into devices, technology, that does well in the market. For this, university graduates must be good communicators with experience in community service and various industries. Graduates should be job creators, not just job seekers. The undergraduate experience should provide job incubation that then churn out the best and brightest fresh, young minds, ready to attack the world and marketplace.
We have EWB, so why not commit campuses to MDG projects, too?
Children are most curious between the ages of 3 and 10, so nurturing the innovative mind must start early, while R&D at the other end of the age spectrum must keep the intelligent people in their own country, continuing research, to prevent brain drain.
“La Main a la Pate” (LAMAP) in France (www.lamap.fr) is designed to help teachers, scientists, institutions etc develop useful science education for the primary school level. The site contains class ideas for activities, science / educational documents, collaborative works and more…

Developing countries suffer from lack of STI
• China graduates 600,000 engineers every year
• India graduates 300,00 engineers every year
• USA graduates 60,000 engineers every year
→ the world must tap into the vast reservoir of GLOBAL engineers for the entire world’s benefit!
Let’s hold international symposia on History of Islamic Science, Engineering and Technology to better understand the recent phenomenon of Islamic rejection of science and instead a retreat to madrasa education

Tim Palmer, Probability Forecast Division, European Center for Medium-Range Weather Forecast

CO2 emissions
• Increasing levels influence the probability of occurrence of drought / flood / heat / cold
• 5 – 100% probability of warm summers in most of the world, projected for the 21st century → the Arctic will be completely ice-free in the summer!
• If Greenland melts, there will be 7m = 23ft rise in sea level
• The Amazon serves as a Carbon sink, but with deforestation and El Nino (and subsequent forest fires), must less C is being absorbed by the forest
• Enhanced greenhouse warming as water vapor, a primary GHG, combines with CO2 emissions

*International Research Institute for Climate and Society = http://iri.columbia.edu/

Ensemble Climate Forecast provides quantitative risk assessment
• ESF = ensemble climate forecast system predicts not only the most likely evolution of climate, but also the uncertainty in such a prediction. More generally, an ensemble climate forecast system predicts a probability distribution of climate. The uncertainties in climate prediction that generate such probability distributions arise from imprecise initial conditions, and numerical approximations to the underlying partial differential equations that govern climate.

Probabilistic simulations of crop yields, monsoons, floods, epidemics-disease-weather relations are useful BUT there are computational technological constraints – need more powerful supercomputers dedicated solely to climate.

Steven Koonin, Chief Scientist, B.P.

Energy demand and use grows with economic development
• In about a half century, 75% of energy demand (and economic growth) will be by developing countries (India and China!) → in 21st century, CO2 emissions from developing countries will exceed that of developed countries
• So what matters is reduced demand, not just efficiency. Often efficiency leads to greater demand. Eg: 23% improvement in engine efficiency led to 11% more annual fuel consumption (in USA, in 2003, I think…)

Energy reserves
• Today the world consumes 85 billion barrels of oil per day
• The 3 largest energy markets are North America, Europe and Asia Pacific who:
• Consume 77% of the earth’s oil, and have 10% of the earth’s reserves
• Consume 60% of the earth’s gas, and have 15% of the earth’s reserves
• Consume 87% of the earth’s coal, and have 64% of the earth’s reserves

CO2 emissions
• Its rising at 1.5% per year
• CO2 lasts for about 200 years in the atmosphere
• Energy consumption has to decrease significantly by 2050 (remember Sachs: we’re ALREADY environmentally unsustainable!), but the energy industry takes very long to create new technology to harness new sources of energy, so this is an URGENT issue we need to address
• If China / India’s emissions = Japan’s, then global emissions will increase by 40%

How technology is deployed is conditioned by social, economic and political situations and contexts
Must educate public policy makers to make proper use of technology as its applied to energy production, consumption and distribution

Frank Rijsberman, International Water Management Institute
The problem isn’t the scarcity of water, but making it available to people and plants.

Water sources
• Rivers
• Groundwater
Overexploitation of these sources leads to high rates of
• Well failure
• Depleted aquifers
• Closing basins

Water Storage
• Need to produce more food per unit land and per unit water, rather than using up more of those 2 crucial resources to make the food in the first place → WE NEED DAMS as ideal and efficient water storage.
• Water storage mitigates the variability of economic growth and rainfall.
• Rainwater harvesting and Watershed management are some methods to capture more rainwater to use on the land.

Water Hygiene
• Need private sector peeps (farmers, etc) to be financed to be able to build wells, standpipes, latrines, hand-washing facilities, all of which are simple and effective.
• Currently raw sewage water in Pakistan, African countries and elsewhere is used for irrigation, personal hygiene etc → no wonder there’s so much disease.

Regions
• Gujarat = “world’s basket case of water management”!
• Middle East + North Africa: water is very scarce
• Africa: water is the top killer via diarrhea and malaria, which are greater burdens than AIDS. Less than 3% of African potential being used to harness water.

Globally, no access to
• Drinking water = 1100 million people
• Affordable sanitation = 2400 million people
• Water for food and livelihoods = 800 million people
• → we have to triple the speed at which people get access to drinking water, and quadruple access to sanitation

Bright spots = communities that do very well in dry, depressed environmental situations purely because of innovative human capital. Think how much more they could do with basic education, shelter, health and food provisions.

Moderated discussion among these 5 speakers:

• The big issue is scaling up – have 5% of all developed world research be PURELY devoted to developing world problems
• Air = public, non rival, non excludable good
• Water = private, but rival and excludable good (when bottled, etc)
• Build indigenous capacity so countries can take care of themselves

Mark Malloch Brown, Chef de Cabinet to the UN Secretary General
**Anubhava Ghosh – UN Human Development Report / UN HD Index

Currently
• Time to renew the social compact between the UN and the peoples – MDGs
• Need a commonality of demand from the international community re: what this international institution should do
• “We are a world flying dangerously close to the sun!”
• UN too fragmented (too many UN agencies) and too supply driven (what will donors provide $ for) so there’s too much overhead

New UN – 3 pillars
• Development
• Security
• Human Rights
Restructuring this will impact the most people in the biggest way
Need system that’s unified around a particular country’s particular needs, infrastructure, political, social, economic and environmental climate, a system that’s demand driven, where the benefits reach the people and don’t end up in the consultants’ pockets.

Carol Bellamy, CEO of World Learning, Former Exec Director of UNICEF

UN Restructuring:
• Global promise and development
• Country-specific standards, goals, policies
• UN must be active, constructive, specialized

Jomo Kwame Sundaram, Assistant Sec Gen for Economic Devt, Dept of Economic and Social Affairs

International economic governance is in 2 modes – Democratic; and Corporate
“One dollar, one vote” – most current governance
Organizations suffer lack of accountability

“Financial liberalization”
• Has led to capital flooding from south to north, not the other way around as promised.
• Also has not been a decrease in cost of funds; rather there exists excess profits to financial institutions.
• Recent developments have led to increased volatility and frequency of financial crises (as seen in East Asia in 1998)

So
• Countries forced to adopt more conservative financial policy than necessary
• Constraints imposed on financial institutions in developing nations
• Papers published demonstrating failure of financial liberalization but Breton Woods organizations have persisted in demanding it
• “Self-funding / insuring” is very expensive, but allows middle income countries to opt out. This, however, exposes the poorest countries to face these policies alone.

Trade liberalization has not contributed to growth or poverty reduction. Note that
• Historically trade liberalization has FOLLOWED development, not preceded it.
• Trade liberalization seriously undermines capacity of development efforts in developing nations
• 1-shot gains from trade liberalization is about 0.5%, ie very negligible
20th century – decline in global trade volume of primary commodities as well as decline in trade volumes of manufactured goods: appears to have something to do with monopoly powers and intellectual property rights.

The only developing countries that stand to gain from trade liberalization:
• Brazil, Argentina, India = from agriculture
• China, Viet Nam = from manufactured goods
**increasing number of suicides among Indian farmers due to high credit costs and inability to adapt to climate change

Doha round of trade negotiations – “developmental” are not really developed in any way. Further they are not held accountable (linked to governance structures, which must be assessed) for failures to achieve meaningful economic development.

Rajenda Pachauri, Energy and Resources Institute; Intergovernmental Panel on Climate Change

“New form of democracy” to empower disenfranchised populations
See sustainable development in context of technology: governments and societies that can’t absorb science suck at (sustainable) development

Concerns on State of the Planet
• Widening per capita income range
• Freedom from fear
• Freedom from want
• Expanding ecological footprint (and as yet developed countries in Asia)

Conceptual Weaknesses in MDGs
• Energy missing from MDGs (explicitly)
• Natural resources and ecological implications
• Technological development
• Human resource development
• “Upward flow of knowledge and experience”
• Appear to be relying on “business as usual” = lack of innovation
• Lack of assessment of progress and innovation towards MDGs at international level (Zdrill panel follow-up)

Meeting the MDGs will be dependent on
• Dissemination of relevant knowledge
• Technological innovation that overtakes the ‘business as usual’ lazy attitude
• Strengthen capacity of institutional ability on grassroots level, including a modernization of traditional industry
• Connections across agencies
• Local voices, solutions, conditions, capacity building
• Assessment and evaluation of progress
• Access portals of shared knowledge

• Institutional infrastructure for innovation
• Sell through market without subsidies
• Rural entrepreneurship
• Customizability of products
• Decentralization of access to technology
• Critical importance of innovation in building design

Case study – brick production in India
Pollution, inefficient energy use, soil loss, GHG emissions, poor working conditions, drudgery
Better idea: vertical shaft brick kiln that reduces pollution, fuel use, drudgery

Use MDGs to overhaul institutions

Eric Schaeffer, Environmental Integrity Project

• An enforcement perspective to what the economists and scientists today have been talking about.
• Perhaps economists are trained to think TOO theoretically…?! Key is how to implement market based programs so that they are enforced securely.
• Enforcement lawyers have an overdeveloped instinct for suspicion!
• Market based programs and approaches does NOT mean less work for the government
• “Lack of enforcement creates uncertainty and perpetuates noncompliance,” says a WB report

“Right to know” programs for companies, power plants
• must inform public about what chemicals they’re using, releasing, across refineries and regions
• a post-Bhopal phenomenon

Examples:
1. Didn’t catch the name
• chemical reports furnished…but data is not entirely reliable!
2. EPA’S Acid Rain Database – Clean Air: Markets, Data and Maps
• A better system
• Easier to maneuver through, compare companies, get hourly updates
3. Enforcement and Compliance History Online (ECHO)
• Again, not terribly accurate data, but data IS getting more refined

Georg Kell, UN Global Compact

UNGC
• Voluntary global initiative, so it has its limits
• Still, a private sector complement to the government
• A cool idea for a public-private hybrid institution
• Motivated 700 partnership projects on health, sustainable development, education, scaling up from grassroots level
• Combines merits of Amnesty International, Transparency International, etc

Business as usual?
• Business has “long gone global”, but individuals and governments haven’t caught up yet! Policy leaders yet don’t speak pro-actively on assimilation, integration.
• Financial investors are recognizing that environmental, social and government issues are crucial to furthering an organization’s success and business plans → thus better equipped to handle situations of international scope, and to be embedded in multiple sectors.
• Business now are more transparent, more accountable, better “communication of progress” from firms to shareholders (not the UN) → performance matters!
• Important to learn how to work with non-state members, ie at the grassroots level, to spread and reinforce global work at the government level. The private sector can be that impetus, that force that drives the government to work harder.

BUT
• UNGC still voluntary only, so can never be robust without the support of the government → both must support each other to create real results
• voluntary organizations cannot be competitive or serious unless their governments become more effective enforcers
• integrity measures are crucial
• To sustain global sustainability and market sustainability in its robustness, such institutions must be embedded in governments that support such market economies.

Moderated discussion between these 4 speakers

National and global goals and initiatives and inconsistencies – it comes down to individual human leadership, or lack thereof. You can have technology and processes in place, but they require human leadership first. We seem to need some political will to bring about change, arousal, awareness in the people on issues of global importance. Must recognize that local goals are in harmony with global goals. Leadership might be idealistic, but idealism is leadership, too.

Must seriously address the question of redistribution, not just growth. Ownership (say, of cars), is one thing, but usage is another: we don’t want developing countries consuming like the US. So keep long term global goals in mind when furnishing developing countries with more cars / products / services.

Tough standards in developing countries are in our best interests! They will cut down on corruption, on bypassing emission tests, etc. If India and China set high standards, the markets in the rest of the world will have to comply, too, to stay in the game with India and China.
BUT must keep in mind the different systems, infrastructure and needs of different countries, and must ensure that a single standard is in fact appropriate to enforce across a number of countries, eg enforcing and selling vaccines: can’t let patents, intellectual property rights, monopoly prices, compromise on the health of poor people. → the National Licensing Provisions work for US, but not Taiwan, India or Brazil (the latter 2 regarding pharmaceutical products)

Non-state actors: move from the state level down, since much work must come from the bottom, ie NGOs within countries that apply pressure on an international level. We’re looking for convergence of ideas with timing and motivation.

NGOs, environmental groups etc “die without information”, so we need to create more access (online).
NGOs can’t focus only on sustainability, they’ll lose relevance. They can’t forget the development factor. They must be innovative.

Peter Singer, Princeton University, Prof of Bioethics

Let’s discuss the value aspect, give an ethical framework to our discussion so far on:

I) Climate change – reducing GHG emissions
Atmosphere IS an ethical question because it’s a public non-rival, non-excludable good. How best to justly allocate it, and have its consumers bear commensurate costs, while maintaining an equitable, “even-handedness” attitude to their usage? → give all countries ‘emission credits’ that they can pollute up to. Any excess credit they have, they can sell to other countries…
• Historical approach – the polluter pays → ‘cept, where do we start? US is the most by far!
• Equal approach – everyone acts and pays equally, so forget past actions by various countries → again US owes the most to the world!
• Prioritize for the worst-off approach – favor the underdog, and have the poorest countries pay the fewest obligations
Globally, governments can trade emission credits
Individually, people can drive more fuel-efficient cars

II) Obligation of the affluent world – foreign aid and fair trade
Due to poverty, there are 10 million preventable children deaths per year = 27000 preventable children deaths per day
“Drowning child” ethical thought experiment, analogous to preventable deaths

Sachs, closing remarks.

END OF DAY ONE

DAY TWO

Sachs

Let’s talk about how market forces can be used to support and promote sustainable development
The market economy is unequalled in its ability to marshal private economic activity, but what about public goods?
What are market forces these days? Not just maximizing shareholder value – that tends to put you in jail, these days!
Discussing stakeholder v. stakeholder is not an issue of choice, but an economic necessity, for a responsible CEO. Wall Street Journal article about Procter and Gamble CEO as “Global Corporate Ambassador” is now it should be.

John Coomber, Retired CEO of Swiss Re Group

Corporately, Swiss Re (and other such firms) employ many to understand and measure risk in dollars
• Identify migration – the safety and frequency of risk
• Tolerance limits – how much can we afford to risk / lose
• Diversification – how do we pool our risk with the risk of others
Focus on identification and measurement of risk
Tracking decisions, monitoring process, then finding those decisions and processes that are successful and executing more of those

How do we address tolerance limits for climate change?
• Unlike business, we can’t diversify or hedge climate-related risk for the world. You just have to stop it!
• So in fact, there are 3 certainties in the world: death, taxes, and CO2 emission limits!
• The real key to link business with climate change is to make the former realize that the latter is needed for strategy and progress
• Disclosure is key – “what gets measured gets done”
• Government involvement is a must

Swiss Re
• Specialist reinsurer
• Sustainable development, excellence, integrity, efficiency
• Project example: missile-shaped (!) building in London with windows that actually OPEN, thus cutting air conditioning needs and costs

Insurance
• Diversify through pooling mechanism
• Risk pricer
• Shock absorber for volatility

4 principles of risk insurance
• randomness
• assessability – quantifiable frequency and severity of losses
• mutuality – risk can be shared among community
• affordability

Why is risk insurance increasing?
• GDP growth
• Migration of risk – people move to risk areas like CA, Gulf coast…
• Increased severity of natural disaster
• Growing values in exposed areas – more development in earthquake prone areas, etc
• Climate change cyclicality is not ‘normalized’ such that natural phenomenon / disasters occur on a regular cycle

Liability
• Loads of climate related lawsuits – a way to get money, but still tricky to link personal injury to climate change
• Let’s limit liability for past emission, and instead do positive work to reduce them!

Insurance industry opportunities
• Higher demand for risk transfer solutions
• Insurance cover for clean energy technology as direct reduction measures, eg windmills
• Trading of emission creds as indirect reduction measure
• Investment opportunities in renewable energy technology, eg GHG market

Economics of Risk
• Event risk: Credit risk = financial, political, strategic, operational
• Insurance: Banks = private equity, equity, fixed income
• About 1% of insurance strategy finds its way into risk industry
• “Carbon Disclosure Project” started in2002, 35 investors; assets grew from $3 trillion to $31 trillion!

Strategies
• Projection: today’s decisions on growth, regulation, customer preferences, technology are based on assumptions about tomorrow, and climate change is strongly tied into assumptions about the future
• Actual weather events directly and indirectly affect availability and cost of energy
• Government actions – trade emission constraints, etc
• Attitude of customers towards emission-friendly brands, investors inhibiting climate-damaging goods
• Clean energy and energy efficiency will provide major corporate opportunities
• → climate change SHOULD be Strategic Planning Assumption
• companies should boldly communicate their sustainable development dedication to make it a part of their brand
• “Wedge Approach” describes 7 technologies for carbon reduction

Final Observations
• Framework for action can ONLY come from government, after which we can all rally together
• Climate change time delay between action and reaction makes it difficult for decision makers to act – clear messages are needed from the scientific and political community
• Climate change should be a focused issue. Don’t bury it under the issue of global CO2 emission and therefore hinder global trade and international relations, without having each country attack its own CO2 problems itself, first.
• Things which get measured get done! Accountability, goals, disclosure.

David Nissen, Director of Program in Intl Energy Management and Policy at the Center for Energy, Marine Transportation and Public Policy
“If things are gonna get done, they’re gonna get done by business, by enterprise”

3 ideas:
• Management: if you measure and manage projects, they DO get done
• Finance: energy development and other development (in sustainable development) involve huge investments. Funding for sustainable development MUST come from capital markets, private institutions, transparent governments over the next 25 years. And these goods must reach ALL people.
• Externalities: new kinds of self-sustaining methods need to reach everyone, and the benefits must outweigh the costs

Abby Joseph Cohen, Partner and Chief US Investment Strategist, Goldman Sachs

4 main themes
I) Socially Responsible Investing (SRI) is growing as an investment niche (“ESG” = Environmental, Social and Governance issues is becoming a buzz word)
II) Investors interested in environment AND fiduciary responsibilities
III) Environmentally sensitive investing cognizant of both risks and opportunities
IV) There can be dramatic impact from ongoing technological changes and structural adjustments in economic. Not unusual for energy supply and usage change.

SRI → ESG
Mandates have flattened out at about $3 trillion for the past couple of years, but that’s a wholesome 15% of US markets: we have some momentum!
Ceres
Network on Climate Risk

• “Eco-Efficiency Premium” increasing as investors have better sense of investing in environmentally-friendly manner and getting good returns
• Market inefficiencies and mispricing exists until gap of investors see eye to eye on investment ideas. This is now happening more actively with environmentally friendly portfolios.
• More sophisticated way at studying industries and activities, to be more environmentally sensitive
• “Make green by being green”
• Company disclosure is key to reputation, regulation, competitive position, new product development, impact on business operations, litigation

How to move the E of ESG into mainframe
• Mutual Funds
• Exchange-Traded Funds
• Company-specific and relative advantage
• Insurance
• Reinsurance
• Carbon emission trading

Ages of wood, coal, and oil are leading to an age of gas and renewables – natural gas, hydroelectric and nuclear, for example
US “regionals” (regional gas companies) are less active in renewable energy usage as compared to “International Majors” (major international gas companies): “maybe it’s a function of their size, maybe it’s a function of something else!”

Joseph Romm, Center for Energy and Climate Solutions, author of “The Hype about Hydrogen”

I have one conclusion on SD: “Sustainable development is a lot like teenage sex. Everybody says they’re doing it, but they’re not. And those who ARE doing it aren’t doing it very well!”

SD feasible? YES!
Is it going to happen? PROBABLY NOT!
Why? WE’RE NOT TRYING!
What does unsustainable development look like? POST-KATRINA!
What does sustainable development look like? DUNNO, WE HAVEN’T GOTTEN THERE YET!

Read the TIME magazine cover story
• Most warming happening in the oceans and at the poles (“it’s the ice sheets, stupid!”)
• Super hurricanes are becoming the norm in the US
• 10 more years of inaction = Greenland will melt
• 20 more years of inaction = W. Antartica will melt
• By 2100, US will be 9 degrees farenheit warmer, on average
• Human-made gases are dominant cause of observed warming
• We must connect climate science with the difficulty involved in reversing our energy trends
• We have to cut fossil fuel use FAST, and ideally by 60-80%
• The average car will have to consume ¼ its current gasoline amount, to accommodate for (disturbing) population growth of about 50% more people by 2050 → shocks of $1000 per barrel of oil are inevitable
• Coal-to-oil is the single worst possible idea, ever

Coal and cars
• Must minimize coal builds to check climate change
• So we need to look more actively into renewables, coal gasification, nuclear energy, carbon capture, etc
• By 2050, we NEED fuel efficiency to avoid catastrophic climate change → low CO2-alternative fuel
• No country ever reduced CO2 and fuel consumption without government mandates, so let’s get on that.
• Hydrogen is just an energy carrier, NOT a coal or gasoline substitute

7 barriers to alternative fuels
• high first cost for vehicle
• storage of fuel
• safety and liability
• high fueling cost
• limited fueling cost
• not cost effective pollution reducer
• touch competition by hybrids

Hybrids
• Higher fuel economy and performance
• Safer cars
• Stabilizes vehicle CO2
• Governments must mandate hybrids!
• Plug-in hybrid
• Most climate friendly car
• Goes 20 miles without plugging into electric grid
• Uses electricity 4 times more efficiently

Future?
• Low carbon fuel, not hydrogen
• Cellulosic ethanol?
• Low-carbon electricity
• Annual fuel bill must be 1/3 regular gasoline bill

Science magazine:
Stabilization Wedges article

We must start NOW to affect change, can’t keep putting off more efficient measure for the future – keep in mind CO2 lifespan in the atmosphere

Regarding “US’s immoral climate non-policy, I offer an apology!”

Stuart Hart, Prof of Management at Cornell University Johnson Grad School of Management

Think about a pyramid:
• Big ecological footprint at the top – assets, incumbents, inertia
• Poverty at the bottom – elites, corruption, isolation

How do we address this?
• Reduce consumption and pollution at the top, through responsibility, guilt, sacrifice
• Raise the standard of living at the bottom, through westernization, aid, structural adjustments…

Sure, but we STILL need new strategy!

Now think of a pyramid, and about sustainable development…as entrepreneurial judo!

Big Footprint at the top → incubate sustainable technology (not disruptive ones!); set up innovative agenda, new business models, local partners → Poverty at the bottom → generate income for the poor → raise their standard of living → migrate upmarket → disrupt incumbents → reduce consumption at the top → Smaller footprint at the top…

World Pyramid

|___| Wealthy (W)
|_______| Emerging Middle Class (EMC)
|____________| Base of Pyramid (BoP)

• the top tier is the wealthy 800 million Americans, earning over $15,000
• the middle tier is the emerging middle class of 1200 million Americans, earning between $1,500 to $15000
• the bottom tier is the base of the pyramid, 1500 million Americans, earning less than $1500 per year

• Saturation of current markets is in W.
• W → EMC through new markets as well as existing capabilities
• EMC → BoP through new markets and new capabilities
• Use pre-existing business models, metrics, develop internally
• Develop entirely new business models, structure, business partners (Ted London’s paper, “How are capabilities created?”

How does a multinational corporation (MNC) become driver of inclusive capitalism?
• Economies of scale, innovation, research
• Engage core and fringe stakeholders – core stakeholders are not particularly interested in new businesses, but fringe stakeholders are the poor, weak, illiterate, non-human (animals), disinterested, that is: those with voices and views that are different to the W- or EMC-driven markets

Mutual value creation = Inclusive, mutually beneficial businesses processes where private sector and local communities build economic, social and environmental value

BoP Protocol – 3 bubbles:
• Opening up: living in the community to identify accurate and appropriate business solutions
• Building ecosystems: network of relationships among MNCs to support businesses
• Creating enterprise: projects being tried in India

David Refkin, Director of SD, Time Inc

Environmental stewardship (we know best, we’ll take care of you!) → environmental sustainability (we have to work together)
Environment, Health, Safety (EHS) → Transparency, Candor
Management → Creating Opportunities
Environmental Leadership → Economic Opportunities

Time doesn’t own forest land or paper mills

Certified Sustainable Forestry (CSF)
• How do you get paper mills to care about sustainable development?
• 3rd party certification
• social component
• bold, clear message and solutions
http://www.tikhvinproject.ru

Go deeper
• Carbon Footprint Study
• Paper Working Group (PWG) organized by METAFORE in October 2003
• Maine Forestry Certification Initiative
• Master Logger Programs
• Environment Paper Assessment Tools (EPAT) – listing typically desired outcomes, this “mother of all score cards” is wide spread in Europe but not so much in the US…

Magazines get together, promote each other when they’re pleased by fellow magazines’ environmental ethics
GE has spent over $1 million promoting ‘eco-magination”: a commitment, pledge, marketing initiative, growth and strategy
Time Inc Sustainability Report

“Play offense, not defense, with the environment. If you play defense you will lose!”

Amy Davidsen, Director of Environmental Affairs, JPMorgan Chase

What role makes sense for JPMorgan to play?
1. Internal footprint – direct
• Use recycled paper, reduce internal CO2 emissions by 5-7% by 2012 through energy efficiency, the “low hanging fruit”
“Equator Princples” – voluntary guidelines to determine environmentally friendly strategies for financial and other institutions, defined by the World Bank
2. Risk Management – indirect
• Location Risk = is project near a particularly environmentally delicate habitat?
• Project Risk = does project needs new roads? Re-settlement?
• Management Risk = does client have capacity to avoid / mitigate these risks?
• JP has “no go zones” where they do not finance projects when the risks above outweigh any possible benefits
3. Climate Change
• JP “sees the business opportunities” in addressing climate change, so they’re getting ahead of the issue, getting smarter, and helping clients to reduce emissions
• Specifically: corporate research explores risks in climate change, therefore leveraging intellectual capital, conducting lots of in-depth research globally, to better manage Carbon use
• They’re quantifying climate change as costs in financial projects
• They will establish public policy to develop frameworks to address direct and indirect GHG emission in USA

Challenges
• Education and raising awareness
• It seems like there’s Wall Street, and then there’s Academia + UN + NGOs…“never the twain shall meet”???
• We must connect the dots, since Wall Street DOES have smart people who can be innovators in sustainable development, too!

Moderated Discussion

• Ideas need funding. Funding needs business sense. Business sense needs enterprise. Enterprise needs government.
• Government HAS helped – we avoided destroying the ozone when the government intervened and assisted chemical companies in developing alternatives, and insisted that people resort to other solutions.
• The scientists identify the problems, the government sets up the market framework, the industry responds.
• BUT, in many industries, a regulatory solution in itself might be unbalanced. “You shall not do…” is one approach, but maybe free markets are more efficient

• We must develop business models based on strengths of a new developing area (where the projects are to be implemented), and not on preconceived ideas. Business models succeed when based on deep levels of trust, not necessarily laws or policy…
• Its really about partnership. Don’t make Boston feel like New York City is telling them how to recycle. Respect your clients, cater and customize your recommendations for them. Know your specialization and use expertise and alertness to maximize on relationships.

• BoP is not homogenous. Various stripes of NGOs, with different specializations, niches – direct action NGOs and collaborative NGOs. Strongly ideological ones can be good wake up calls, but you need constructive and productive ones, too, as per needs of that region.
• Need mutual, two-way cooperation between NGOs and other sectors
• The people are the shareholders of the earth. The NGOs need to generate a more political framework so there’s a business-political activists situation that everyone can work in.

• “The problem in this world right now is the United States of America.” All other developed nations have committed to SOME level of sustainability.
• Indian and China have rightfully agreed to go first with coal usage cuts
• There’s currently a “patchwork quilt of regulatory policies” that corporations must face → we need the right standards, and we need consistent standards so that businesses can construct successful plans and models
• Unleash the powers of entrepreneurship! Don’t let the incumbents who don’t want to see change, dominate!

• The BoP is the poorest, and therefore the most inefficient farmers, the highest polluters and the most self-destructive.
• Solar technology, etc, is available and CAN be made accessible if we can create appropriate business models to make it happen
• Example: Light Up The World NGO
• Microfinance platform should be accessed more

Roberta Balstad, Drector, CIESIN

Challenging behavioral perspectives and paths to implement stuff from previous panels ie research & ingenuity; enterprise & market forces
Understanding religious, cultural, institutional behavior to better implement change

Joel Cohen, Laboratory of Populations, Earth Institute and Rockefeller Univeresity

One planet, but 2 different worlds – rich and poor – when you measure parameters such as GNP % increase per year (Pakistan at 8%!), % HIV, infant mortality rate, children per woman, life expectancy, urban v. rural; population density
If women had one more or one less child , there would be about 3 billion more or less people by 2050 (UN projects 9 billion people by 2050)
NOTE THE GROSS MISDISTRIBUTION with poorer countries (N Africa, W Asia) absorbing most of the population growth
From here on out, there will be more OLD than young people
“End of the rural life” – urban population > rural population by 2007

So what’s affected?
• Population: aging
• Economy: GDP $2 – $32 trillion (wealth driven by energy) 1900 – 2000, GDP / capita increases, poor population increases
• Environment: “humans are biogeochemists”
• Culture: major cultural event will be the spread of primary education in the world, not Michael Jackson; Primary Gross Enrollment (PGER) increases

Panacea?
1. Bigger Pie – increase productivity
2. Fewer forks – slow population growth, unwanted material by-products
3. Better manners – no corruption, violence, etc

Educating children for 10-12 years with the above 3 steps is ideal
• 20% of children have no primary education
• 50% of children do not attend secondary school
• 60% of children who do not go to school are girls
• See UBASE project
• See Global Environmental Digest

The Thailand Declarations failed → will the MDGs fail?
Sub Saharan Africa + (East Asia & Pacific) + (South and West Asia) = 85% of children OUT OF school in 2001

Education affects population
• Live longer
• Marry later
• Migrate more
• Less children, better quality of life for those children

Population affects education
• Population density → school size and location
• Rapid population growth makes schooling more difficult
• Number of children of school age will decrease by 13% in more developed countries, by 2025
• Number of children of school age will increase by 7% is less developed countries, by 2025

→ Population education should be part of education!
• We must understand how demographic characteristics affect daily lives
• Micro and macro level analyses
• Environmental, economic and sex education (Bush is withholding the last one!)

• We want universal primary education, but its hard to assign to a cost to this since means of education vary, attitudes towards schooling (as relates to opportunity cost) vary, etc
• Developing countries spend $82 billion per year on primary schooling → this averages out to about $151 / child / year
• UNICEF, UNESCO etc estimate $6.5 – $35 billion in ADDITION
• Universal secondary education could cost $27 – $62 billion more
• So total = $34 – $69 billion more per year in developing countries for universal primary and secondary schooling
• That’s an incremental cost of
o 3-7% of low income countries’ GNP
o 0.6 – 1.2% of middle income countries’ GNP

Sir Partha Dasgupta, Professor of Economics, University of Cambridge
“Orthogonal to the other speakers, I’m going to talk about…” (!!)

Economists sometimes say that global warming is not today’s problem, therefore its not our problem! Its tomorrow’s problem! A Copenhagen study published in the Economist showed that it was given least priority on a list of issues facing the world today.

The problem is NOT economics, but a reluctance to engage with environmental scientists and gain more insight.

Economic analysis, if pursued dispassionately, conveys a message:
Economists tend to use a positive rate to discount benefits that come from future costs
So the longer it takes for a project to return a reward, the less people want to do it…
But we’re dealing with a global COMMONS when it comes to climate change

So why do we discount collectively?
• We, as individuals, display impatience
• Intergenerational equity concerns if consumption per capita is expected to increase over time
• Empirical evidence suggests discount future consumption benefits is about 3 times the percentage rate of change of consumption per capita
• Discount rate is ANCHORED in forecasted consumption rates
• Positive discounting attenuates the situation
• Global commons – social rates of return on investment v. private rates of return on investment

Johan Rockstrom, Stockholm Environment Institute

• A new fresh water paradigm, shifting perspective from blue water to green water
• The challenge of hunger is essentially the challenge of water management
• 90% of human water requirements are for food production
• soil fertility affects what should be a linear relationship between rainfall and yield

• 40% water = blue water flow = liquid flow of river and ground water → leaves catchment in rivers, aquifers, eventually deposits into oceans
• 60% water = green water flow = unsaturated zone, water vapor → evaporation, transpiration → generates biological ecosystems
• 40-60 is the average split; its way WHACK in Africa.

• Ecosystems aren’t linear and predictable. They are complicated, have feedbacks, so they need buffer zones.
• 10 – 15% of rainfall is productive green water flow.
• 85 – 90% runs off as groundwater, evaporates, etc
• So declining rain water over time is worrying
• To have hunger eliminated by 2025, we have to increase water use (ie for irrigation and agriculture) by twice what it is now, which is nearly impossible. Yet this is NOT being addressed by the MDGs.

• Blue contribution – rivers are running dry; 85% of water must come from more effective use of blue water by farmers, etc.
• Blue concern – 5250km cubed water / year is available for runoff. We use about 4000 km cubed currently so we are approaching a crisis as our irrigation needs go up with population growth
• …we need to tap into Green water more:
• direct uses = economic bio mass growth, ie fuel
• indirect uses = wetlands, grasslands, forests, supporting ecosystems
• so, a trade off: to halve hunger, we have to eat into green water flow that’s currently supporting OTHER ecosystems
• → “supplemental irrigation” integrates green-blue management; subsurface tanks
• combine conservation agriculture, economic sanitation and water dynamics with major investments and ideas, and we CAN achieve MDGs with less water → perhaps try it in the Millennium Villages

conventional “blue approach” is inadequate, incomplete
• large risk in water tradeoff
• dry lands are not that dry after all; in fact the savannah regions are a global hot spot
• more ‘crop per drop’ possible especially for (and by) poorer farmers
• governance must change from blue water bias, to green-blue integrated management and land management
• human capacity (ie, education) and policy encompassing water, environment, agricultre etc, should improve to cater to green AND blue water issues

Parker Mitchell, Engineers Without Borders

Understand the importance of DEFINING the problem
Ideas + money → Implementation → Impact
Implementation must be location specific, dynamic and incorporate project particulars, so there is no standard recipe
Behavior change is CENTRAL
Development = promoting POSITIVE change, so we must understand change and behavior

Low capital technology can be viable solutions
• Eg: solar pasteurization for water purification
• Eg: chlorination

Non economically-rational influences drive behavior change, and so are important in planning projects and developing technology
• Eg: conservation farming – NOT backbreaking, if explained entirely and enacted correctly
o Must dispel paranoia from risk-averse community
o Complexity and precision are required, so must be implemented accurately
o Relative advantage relative to rainfall
o Farmers’ motivation – traditions, alternative explanations, beliefs
• Sorghum better than maize
o Economically
o Health wise
o Susceptibility to drought
• YET
o Cultural, societal stigma – sorghum is a “poor person’s crop”
o There’s a bigger maize market (assuming these subsistence farmers manage to produce a surplus crop!)
• SO: EWB promoted sorghum as a staple crop to overcome the stigma AND create a market for it

Behavior change leads, not lags, development, and is central to ideas of development
• Can’t overlook educational programs or free-input components
• Behavioral change DOES convert incomes into investment, if in the hands of women (then it goes into health care and education, instead of being consumed on alcohol and tobacco…)
• Understand society trends, like cultures of dependency

Understand the community, and embrace (in order to learn from) mistakes. Hell, might as well put together a journal discussing the challenges faced and errors encountered by EWB volunteers, and call it “Damn, This Isn’t Working!”. Also, stick more implementers in the field for more experience and expertise.

“In theory, there might be no difference between theory and practice, but in practice, there is!”

Andrew Dobson, Ecology and Evolutionary Biology Professor, Princeton

• Understand that there ARE people whose lives are dependent on their natural environment
• We forget to quantify ecosystems – air, water, food, disease control – and we forget to appreciate them or understand them better
• Realize that there is a significant gap of understanding and processing between the rich man and ground water: we just drink out of our posh Dasani bottle and don’t think beyond that
• Ultimately, all life on earth is dependent on services provided by other species

How best to classify eco-services?
• More things than we realize can be classified as ecosystems
• Are they resilient?
• Will they collapse?
• Different tropic levels of species and ecosystems. We are more attracted to higher tropic beings (bears, say) when in fact the lower tropes are performing life-essential processes such as photosynthesis. If bacteria A goes extinct, bacteria B takes over and we neither notice, nor care.
• As we lost species, we lose higher trophic species first.
• As land area declines, species are lost, too – first the brittle ones, then the resilient ones.
• Once we acknowledge the dependence of converted on unconverted land, we are more prone to conserve land

• Global climate change works from the poles to the equator
• Global habitat change works from equator to the poles
• → global change cycle: pristine land → agriculture, so irrigated → degraded land → natural species and time fix land → pristine land…analogous to, say, natural history of measles infection and its recurring loop from birth (of human) → susceptible human → infected human → recovered human, that gives birth…
• A new born can go straight to being ‘recovered’ with vaccines and appropriate health measures; similarly, land can stay pristine if its maintained as ‘reserve’

Assessment of Millennium Assessment
AAAS

Without complete and thorough research, goals, and international partnerships, we end up “barking up the wrong genetically modified beanstalk!”

Moderated Discussion

• Dobson: I don’t know many Masai tribespeople have a psychologist they speak to. That MIGHT have something to do with the ecology they COEXIST with!

• Cohen and Mitchell: Education DOES depend on non-educational structure – have to be aligned with hunger and disease control efforts. So can’t have singular priorities when there are multiple root causes that are location and culture specific.
• Dasgupta: Also don’t forget the perturbation and feedbacks that we, the rich, create and the lifestyles we lead as ill-educated peoples with huge consumption and selfishness trends!

• Mitchell: Have real field perspective – like more women on these panels, for example!
• Rockstrom: Culture is veritable, but its timeframe is smaller than the sentiment attached to it. Father’s plough, from father’s father, from grandfather’s father, etc, is well and good, but that’s just, say, 80 years of culture, compared to far longer lasting effects on the earth due to unfriendly human farming and other practices. Even slash-and-burn techniques from centuries ago were more environmentally friendly than what goes on now!

Final panel: Cohen, Dasgupta, Pachauri, Sachs, Abby Joseph Cohen, Kristof

• Cohen: Time scale of democratically elected officials is far smaller than natural phenomena, yet people are voting on behalf of people AND non-human species, so be a little more sensitive to the worlds’ needs! The WORLD, not YOUR OWN needs! Similarly, the US government’s decisions and politics affect those NOT in the USA, like CO2 emissions, our non-metric system, etc…

• Kristof: Security issues are crucial. The 2 worst places to be born today are Darfur and the Congo
• Sachs: Security is vital, yes, but we need strong development plans, to link security, development and sustainability. For example, Darfur violence has and would and will go on over water stress and more. Its all about engaging people at the grassroots level → we need large scale understanding.

• Pachauri: communism collapsed because the government lied about the economy. Capitalism will collapse if the government lies about the ecology!

Sachs: Summation

• If you’re not terribly confused by now, you just don’t get it!
• Remember that we STILL don’t know if sustainable development is feasible. Sure, if things can’t go on, they WON’T, but such a mindset will end in disaster!
• What’s clear is that the time dimension we have to answer these long-term problems in, is pressing on us, because CHANGE IS CUMULATIVE: CO2 emission doesn’t just go away, extinct species don’t just come back to life…

More resources:
• Scientific American
• NY Academy of Sciences
• Earth Institute
• Time Inc
• Millennium Promise

END OF DAY TWO

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