This week's Perspectives
Week ending 15th November 2022
A quick summary of our Daily Perspectives
A focus on measurement to reduce food waste
Trying to keep industry in Europe?
Truly sustainable living?
Interconnectors in Asia - boosting availability of hydropower
Transition as important as endgame for industrial revival
Insurance industry creating impact and risk-adjusted returns
Thinking differently about EV charging
Cities and the road to implementation
'Baseload' electricity from renewables
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A focus on measurement to reduce food waste
A study found that using meal boxes which precisely measure ingredients can lead to a 38 percent reduction in food waste from households. In the UK, per capita food waste per annum in households is the same as my weight! Frozen could be one solution also to reduce food waste in the home.
What is the big investing theme?
Waste has been an inevitable problem of the traditional linear production and consumption model. Reducing and eliminating waste is a big area for decarbonisation in energy and finished goods such as food - waste less, consume less, generate less. What we do with that waste can also contribute to harmful emissions. Food waste entering landfills, for example, is estimated to generate between eight and ten percent of global GHG emissions. The circular economy and other recycling paradigms offer one route. Other innovations from the technological to the economic to the behavioural can also help.
Trying to keep industry in Europe?
BMW has said its hatchback and small SUV electric Minis will be built in China. BASF recently announced that it was seeking permanent cost cuts in Europe, quoting “the triple burden of sluggish growth, high energy costs and over regulation”. Electrification could become a meaningful driver of competitive advantage for many industries in Europe.
What is the big investing theme?
Where industry is located, especially when a new plant is being considered, has always been a 'battle of the subsidies'. Companies understandably encourage countries or regions to compete. But, at the end of the day, its often fundamentals that win out. Where does it make economic sense for manufacturing to take place, does the region have a skilled workforce, does it have good access to raw materials and end markets, and increasingly now, what does regulation look like and how cheap (or expensive) are energy costs.
Truly sustainable living?
Self sufficient and sustainable cities and communities such as The Park in South Africa and Ashwicken in Norfolk require many disciplines effectively working together. From these concerted efforts, such communities can make significantly positive impacts on environmental, social, and economic factors.
What is the big investing theme?
We are used to the traditional investment world being divided along industry or sector lines - silos really. Sustainability illustrates how interconnected themes and ultimately industries are. A holistic approach is necessary to enable an effective transition. Smart Cities are a good example of interconnected thinking. This is escalated when we consider what is needed to create truly self-sufficient and sustainable living communities. Multiple disciplines from material science, engineering, IoT, natural capital and agriculture as well as health & well-being will need to be brought to bear.
Interconnectors in Asia - boosting availability of hydropower
A new electricity interconnector between Singapore and Malaysia has been completed, doubling capacity to c. 1,000MW. It will be used for cross-border power trade in the Lao PDR-Thailand-Malaysia-Singapore Power Integration Project that will import up to 100MW of renewable hydropower from Lao PDR to Singapore. Europe and China both have strong positions in electricity interconnectors.
What is the big investing theme?
As countries move toward electricity generation systems dominated by renewables, the need for supporting infrastructure becomes greater. This will include battery/long term storage, demand management and interconnectors, which will enable balancing renewable electricity to be brought in from adjacent regions to offset periods of local shortage.
Transition as important as endgame for industrial revival
Industrial revival can sustain communities and provide infrastructure for new greener industrial processes and products. However as thousands of dead crabs and lobsters can testify to, how we get there is important.
What is the big investing theme?
The transition to greener and more sustainable industries and way of life can require significant change and disruption. It is important to understand where that disruption may be contributing to the problem that the development of greenfield or redevelopment of brownfield sites are designed to solve. This could flag potential future liabilities.
Insurance industry creating impact and risk-adjusted returns
QBE's Premiums4Good programme is an example of how money can be put to work creating positive impact whilst earning a fair return. Insurance companies can create impact by choosing not to underwrite projects that could adversely impact the transition, invest in impactful projects that generate a return or by reducing their own underwriting risk by directing capital to projects mitigating the harmful effects of climate change.
What is the big investing theme?
The finance industry can play an important role in the transition through its funding and investing activities. Insurance companies can play a triple role through their choice of projects to underwrite, their choice of investments and activities in the sustainability space that ultimately reduce the risk they are underwriting.
Thinking differently about EV charging
Many analysts think EV charging is something that will happen at night and at home, adding to electricity demand. But researchers at Stanford argue that shifting EV charging from home to work, and night to day, could cut costs and help the grid by matching demand with the supply from solar and wind. This could change which business model is the winner.
What is the big investing theme?
Investing in the infrastructure required to charge the growing number of EV’s should be a massive opportunity, potentially allowing investors to make a real difference to the transitions and earn a fair financial return. But what if the big opportunity isn't in at home EV chargers and/or fast chargers on motorways, but actually mid-sized, mid-speed chargers that can be used at workplaces and at travel and/or shopping destinations - integrated with battery storage and demand management tools!
Cities and the road to implementation
"A New York City's worth of building every month for the next 40 years."
With current predictions for population growth and urbanisation, that is what is probably required - a doubling of the current global building footprint.
I was fortunate enough to be able to attend (virtually) the Eco-Business "Cities: Possibilities 2022 - COP27: The road to implementation" conference in Singapore. This is where I got the "NYC" stat - thanks to Vinamra Srivastava, Chief Sustainability Officer, of CapitaLand Investment in his highly insightful keynote presentation.
The focus of the event was on implementation, the "how" and this is where the private sector has a huge role to play. There are some encouraging things happening, such as CapitaLand's 'Sustainability X Challenge' and the 'Liveability Challenge 2023' led by the Temasek Foundation, but also still much that needs to be done.
Examples of concrete steps (no pun intended) taken towards net-zero, as well as challenges they have faced, highlighted some commonalities including integrating sustainability into the entire life-cycle of the business.
A transition to sustainable green cities has lots of challenges requiring a holistic approach engaging with all stakeholders including a city's citizens. Scaling solutions was seen as a key challenge with regulation polling as the biggest challenge, although panellists felt it could in fact be the biggest driver!
Ultimately not all innovation will work and so there is a need to consider different pathways to reach the same long term 2050 target. That requires a focus on the next 2-3 years as well as that longer term. That can make funding through traditional channels difficult and calls for a more collaborative and blended investment approach.
Finally, when considering the implementation of projects it is key to understand that financial returns are not necessarily at odds with sustainability.
What is the big investing theme?
The built environment is an important sustainability theme, both as an integral part of societal existence but also a major decarbonisation (40% of energy-related GHG emissions) and resource consumption problem (40% of global raw materials) that needs investor attention. Including residential and commercial buildings, communal areas such as parks and supporting infrastructure such as energy networks, mobility, and water supply, it can have significant impacts on our health, well-being and equity & inclusion as more efficient buildings can be more affordable. The health and well-being of people using the built environment (remember it is not only buildings but also the supporting infrastructure including parks, roads etc) is also crucial to enable a more sustainable way of living.
'Baseload' electricity from renewables
It used to be said that renewables cannot provide 24/7 electricity. This project in Australia says otherwise. Yes, it's for an isolated mine (Olympic Dam), but a combination of wind and batteries is expected to meet half of Olympic Dam’s forecast electricity needs from 2025. Another step toward 70-80% renewables on the grid.
What is the big investing theme?
Many commentators say that variable renewables cannot power the electricity grid without fossil fuels (mostly gas) as they cannot provide what they call baseload power, by which they mean 24/7. When we started in this industry, many said that renewables could not be more than 10% of load, that went up to 20% and now 50% plus is generally accepted. The next step is to get to 80-90% (beyond that is currently expensive) - which means adding in interconnectors, short/mid duration storage and demand management. Some countries are there already, mostly using hydro. This is the big investment theme of the next decade.
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