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Economy

How sustainable investment has already changed the world

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It’s fair to say that the vast majority of us do not want to harm our planet for our children and grandchildren. Yet the investment decisions we make today can have that impact.

This article is an extract from Richard Essex’s 2014 book, Invest, Feel Good and Make a Difference, which is available now on Amazon.

Many people are now starting to recognise that they should think differently about investing. There is still however a disconnect with many people. They can’t see how their investment is going to make any positive difference to our physical and social environment.

Positive changes are happening

We are starting to make a difference already. If we take one of the major challenges that face us, the decarbonisation of the planet, significant changes are happening.

According to the United Nations Environmental Programme (Unep) report of 2012, total worldwide investment in renewable power and fuels had increased by 17% from the previous year. This figure had now reached $257 billion, a sixfold increase on the 2004 figure. Renewable sources have now grown to supply 16.7% of global energy consumption. In addition, the report points out that investment from the private sector was almost double that of the public sector.

Another major demand is improving the health of an ever growing population. Again, major strides have been made.

According to the World Bank child mortality (based on children dying before age five) has reduced from 13 million in 1990 to around eight million in 2012. Again, private sector investment has been an important contributor here.

In order to make my point more succinctly I think it’s useful to give more specific examples of where positive channelling of money has really made a difference.

The Vienna plan

The first example I researched was a result of a recent journey I made. My partner is Hungarian and last year we were travelling over to see her family. Because they live close to the Austrian border, we flew to Vienna and on the drive from the airport I was surprised by the masses of wind turbines that are scattered around the Vienna area.

Later that evening, I carried out some research on the origins of this discovery and unearthed something far more significant. It transpires that back in 1973, Vienna put together a plan aiming to seriously change its energy mix to a more environmentally-friendly solution.

As a result, a Vienna-wide investment hub was set up and this was the trigger to attract investment from the public and private sector, but including funds from people like yourself. Yes of course there were hiccups on the way but in the long-term the success has been staggering.

The Vienna region now produces over 60% of its electricity from alternative energy. This includes (in production ranking) hydro-electric, biomass and wind. Putting that into context, the UK provides less than 10% from these sources. Correspondingly Vienna is achieving great reductions in CO2.

Reduction in landfill in the UK

Another good example closer to home is the massive reduction in landfill due to vast improvements in green alternatives such as recycling.

According to the Department of Environment, Food and Rural Affairs (Defra), landfill from the residential sector reduced from 22m tonnes in 2001 to under 10m tonnes in 2012. At the same time the recycling rate has increased from 11% in 2001 to over 50% in 2012.

This has real positive environmental advantages because landfill emissions produces a number of gases, the most lethal of which is methane. Not only does methane creep into the ground helping to pollute rivers and groundwater, but it’s about six times more damaging than CO2 to the ozone layer. This is not forgetting that landfill is an eyesore and the fact that in this country we are running out of landfill space.

The difference was made here due to a combination of public and private investment. Local authority tendering has contributed to the above significantly, but equally private investment in recycling companies has also provided valuable input.

A growing market

Contributing to these big challenges isn’t just the remit of governments or large charitable donors. There is an ever-growing body of commercial companies that are recognising their social and environmental responsibilities and as a result making major contributions. Significantly, these are the very companies that you can invest in easily via your pension plan or your savings fund.

It is impossible to be precise about the sheer numbers of these companies that are out there in the marketplace. It is also difficult to be precise on how responsible a company is and whether it is making an overall net contribution.

One measure that we do currently have however is offered by the number of sustainable and responsible investment (SRI) indices that have been developed over the last few years.

A good example would be the FTSE4Good Global Index that was established in the UK in 2001. The FTSE4Good Global Index incorporates companies globally that meet certain corporate ethical standards. In particular, companies are researched and scored on environment, social and governance (ESG) ratings.  They have to show acceptable scores across the range of their activities.

As of October 2012, the index had 736 constituent companies and a market capitalisation of over 13 trillion US dollars. These constituents have been picked from the general FTSE World Global Index, which has 2870 constituent companies and a market capitalisation of over $29 trillion (£15 trillion). Therefore FTSE4Good represents 25% and 43% on numbers and value respectively.

Richard Essex is an independent financial adviser with Grayside Financial Services, where he is a specialist for green and SRI advice. He is also on the steering committee with the Ethical Investment Association, a member of the UK Sustainable Investment and Finance Association (UKSIF) and the author of the 2014 book, Invest, Feel Good and Make a Difference.

Photo: ellesmere FNC / James via Flickr

Further reading:

Breaking the eight myths of sustainable and responsible investment

Alternative Wall Street Journal: the financial advantage of socially responsible investing

Sustainable investment: what are you investing for?

Invest, Feel Good, And Make a Difference: an interview with the author

The Guide to Sustainable Investment 2014

Richard Essex is an independent financial adviser with Grayside Financial Services, where he is a specialist for green and SRI advice. He is also on the steering committee with the Ethical Investment Association, a member of the UK Sustainable Investment and Finance Association (UKSIF) and the author of the 2014 book, Invest, Feel Good and Make a Difference.

Economy

Will Self-Driving Cars Be Better for the Environment?

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self-driving cars for green environment
Shutterstock Licensed Photo - By Zapp2Photo | https://www.shutterstock.com/g/zapp2photo

Technologists, engineers, lawmakers, and the general public have been excitedly debating about the merits of self-driving cars for the past several years, as companies like Waymo and Uber race to get the first fully autonomous vehicles on the market. Largely, the concerns have been about safety and ethics; is a self-driving car really capable of eliminating the human errors responsible for the majority of vehicular accidents? And if so, who’s responsible for programming life-or-death decisions, and who’s held liable in the event of an accident?

But while these questions continue being debated, protecting people on an individual level, it’s worth posing a different question: how will self-driving cars impact the environment?

The Big Picture

The Department of Energy attempted to answer this question in clear terms, using scientific research and existing data sets to project the short-term and long-term environmental impact that self-driving vehicles could have. Its findings? The emergence of self-driving vehicles could essentially go either way; it could reduce energy consumption in transportation by as much as 90 percent, or increase it by more than 200 percent.

That’s a margin of error so wide it might as well be a total guess, but there are too many unknown variables to form a solid conclusion. There are many ways autonomous vehicles could influence our energy consumption and environmental impact, and they could go well or poorly, depending on how they’re adopted.

Driver Reduction?

One of the big selling points of autonomous vehicles is their capacity to reduce the total number of vehicles—and human drivers—on the road. If you’re able to carpool to work in a self-driving vehicle, or rely on autonomous public transportation, you’ll spend far less time, money, and energy on your own car. The convenience and efficiency of autonomous vehicles would therefore reduce the total miles driven, and significantly reduce carbon emissions.

There’s a flip side to this argument, however. If autonomous vehicles are far more convenient and less expensive than previous means of travel, it could be an incentive for people to travel more frequently, or drive to more destinations they’d otherwise avoid. In this case, the total miles driven could actually increase with the rise of self-driving cars.

As an added consideration, the increase or decrease in drivers on the road could result in more or fewer vehicle collisions, respectively—especially in the early days of autonomous vehicle adoption, when so many human drivers are still on the road. Car accident injury cases, therefore, would become far more complicated, and the roads could be temporarily less safe.

Deadheading

Deadheading is a term used in trucking and ridesharing to refer to miles driven with an empty load. Assume for a moment that there’s a fleet of self-driving vehicles available to pick people up and carry them to their destinations. It’s a convenient service, but by necessity, these vehicles will spend at least some of their time driving without passengers, whether it’s spent waiting to pick someone up or en route to their location. The increase in miles from deadheading could nullify the potential benefits of people driving fewer total miles, or add to the damage done by their increased mileage.

Make and Model of Car

Much will also depend on the types of cars equipped to be self-driving. For example, Waymo recently launched a wave of self-driving hybrid minivans, capable of getting far better mileage than a gas-only vehicle. If the majority of self-driving cars are electric or hybrids, the environmental impact will be much lower than if they’re converted from existing vehicles. Good emissions ratings are also important here.

On the other hand, the increased demand for autonomous vehicles could put more pressure on factory production, and make older cars obsolete. In that case, the gas mileage savings could be counteracted by the increased environmental impact of factory production.

The Bottom Line

Right now, there are too many unanswered questions to make a confident determination whether self-driving vehicles will help or harm the environment. Will we start driving more, or less? How will they handle dead time? What kind of models are going to be on the road?

Engineers and the general public are in complete control of how this develops in the near future. Hopefully, we’ll be able to see all the safety benefits of having autonomous vehicles on the road, but without any of the extra environmental impact to deal with.

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Economy

New Zealand to Switch to Fully Renewable Energy by 2035

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renewable energy policy
Shutterstock Licensed Photo - By Eviart / https://www.shutterstock.com/g/adrian825

New Zealand’s prime minister-elect Jacinda Ardern is already taking steps towards reducing the country’s carbon footprint. She signed a coalition deal with NZ First in October, aiming to generate 100% of the country’s energy from renewable sources by 2035.

New Zealand is already one of the greenest countries in the world, sourcing over 80% of its energy for its 4.7 million people from renewable resources like hydroelectric, geothermal and wind. The majority of its electricity comes from hydro-power, which generated 60% of the country’s energy in 2016. Last winter, renewable generation peaked at 93%.

Now, Ardern is taking on the challenge of eliminating New Zealand’s remaining use of fossil fuels. One of the biggest obstacles will be filling in the gap left by hydropower sources during dry conditions. When lake levels drop, the country relies on gas and coal to provide energy. Eliminating fossil fuels will require finding an alternative source to avoid spikes in energy costs during droughts.

Business NZ’s executive director John Carnegie told Bloomberg he believes Ardern needs to balance her goals with affordability, stating, “It’s completely appropriate to have a focus on reducing carbon emissions, but there needs to be an open and transparent public conversation about the policies and how they are delivered.”

The coalition deal outlined a few steps towards achieving this, including investing more in solar, which currently only provides 0.1% of the country’s energy. Ardern’s plans also include switching the electricity grid to renewable energy, investing more funds into rail transport, and switching all government vehicles to green fuel within a decade.

Zero net emissions by 2050

Beyond powering the country’s electricity grid with 100% green energy, Ardern also wants to reach zero net emissions by 2050. This ambitious goal is very much in line with her focus on climate change throughout the course of her campaign. Environmental issues were one of her top priorities from the start, which increased her appeal with young voters and helped her become one of the youngest world leaders at only 37.

Reaching zero net emissions would require overcoming challenging issues like eliminating fossil fuels in vehicles. Ardern hasn’t outlined a plan for reaching this goal, but has suggested creating an independent commission to aid in the transition to a lower carbon economy.

She also set a goal of doubling the number of trees the country plants per year to 100 million, a goal she says is “absolutely achievable” using land that is marginal for farming animals.

Greenpeace New Zealand climate and energy campaigner Amanda Larsson believes that phasing out fossil fuels should be a priority for the new prime minister. She says that in order to reach zero net emissions, Ardern “must prioritize closing down coal, putting a moratorium on new fossil fuel plants, building more wind infrastructure, and opening the playing field for household and community solar.”

A worldwide shift to renewable energy

Addressing climate change is becoming more of a priority around the world and many governments are assessing how they can reduce their reliance on fossil fuels and switch to environmentally-friendly energy sources. Sustainable energy is becoming an increasingly profitable industry, giving companies more of an incentive to invest.

Ardern isn’t alone in her climate concerns, as other prominent world leaders like Justin Trudeau and Emmanuel Macron have made renewable energy a focus of their campaigns. She isn’t the first to set ambitious goals, either. Sweden and Norway share New Zealand’s goal of net zero emissions by 2045 and 2030, respectively.

Scotland already sources more than half of its electricity from renewable sources and aims to fully transition by 2020, while France announced plans in September to stop fossil fuel production by 2040. This would make it the first country to do so, and the first to end the sale of gasoline and diesel vehicles.

Many parts of the world still rely heavily on coal, but if these countries are successful in phasing out fossil fuels and transitioning to renewable resources, it could serve as a turning point. As other world leaders see that switching to sustainable energy is possible – and profitable – it could be the start of a worldwide shift towards environmentally-friendly energy.

Sources: https://www.bloomberg.com/news/articles/2017-11-06/green-dream-risks-energy-security-as-kiwis-aim-for-zero-carbon

https://www.reuters.com/article/us-france-hydrocarbons/france-plans-to-end-oil-and-gas-production-by-2040-idUSKCN1BH1AQ

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