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How you pay for the City: episode two review



In the second episode of a four-part BBC Radio 4 series, David Grossman continues his investigation into how you pay for the city. This time, he digs deeper into the world of finance to find out the actual cost of saving for a pension.

In order to enjoy their retirement, pensioners need money, and often the most efficient way of doing so is by years of hard work, saving and paying into pension funds. This seems obvious, right?

According to Grossman, this is not so. He found that the British system is often flawed by strategies that are expensive on returns. One saver who Grossman speaks to in the programme said that the exact amount he had paid in to his pension had been topped up by just 5% during a period in which the FTSE 100 had grown by around 60%. So, where has all this money gone?

In his first episode, it was revealed that the high costs of investment chain management, multiple intermediaries and complexity often drive up the cost of saving. In addition to this, the way in which returns are generated often minimise the returns that are actually seen by investors.

“In Holland”, says David Pip-Watson, who used to manage BT’s pension fund, “they set up huge collective schemes into which everybody puts their money. Those big collective schemes are structurally much more efficient and lower cost than the way in which we do it.”

Watson attributes the low returns of a UK saver, typically 50% less than a Dutch counterpart, to companies not being able to afford the rising pensions bill. Employers can no longer afford to pay for longer when people’s lives are lasting much longer than ever before, so instead they place the money into an individual savings account (ISA), often with minimal returns.

Although the costs of managing the investment industry have gone up in recent years, returns haven’t. In effect, savers are paying more for the service and getting less from it. Why is this?

“One thing that drains a fund is churn”, says Grossman. Churn is the excessive buying and selling of stocks in search of returns, and for every transaction that is made, some intermediary somewhere along the 16-layered chain will bill investors for their troubles.

Dominic Hobson, an industry expert, tells Grossman that a study he carried out found that there is no correlation between high churn and return rates. Fund managers therefore have no reason to excessively trade; after all, if the performance of the fund is low then their share of the profits will be lower.

But there are some benefits to fund managers creating business for brokers, and the brokers will often reward fund managers for doing so.

In addition to this, managers can also create revenue through stock lending. Gina Miller, who left the industry after concerns over excessive fees and hidden charges explains this concept.

“If you get a new car and you went to bed at night knowing that your new car is on your drive, stock lending is like someone comes along with a spare key, takes it out for the night as a taxi driver, earns income from your car and you will have no idea in the morning that it’s gone, she says. 

The proceeds from lending stock belong to the owner, right? This is not always the case; fund managers have been known to pocket the fees themselves. Recent rules stipulate that fund managers can only take “reasonable costs” from the fees paid by lenders, but the lack of clarity means that in some cases, fund managers are taking 40% of the proceeds.

Is it more regulation, then, that is needed? Economist John Kay disagrees. He says that more regulation would require an addition layer each time. Who regulates the regulators? Who oversees those doing the overseeing?

He says he wants to see ethical values at the heart of the industry: “The only way to deal with this actually is to put back trust in the system, but that’s something that required a long period of time and a big culture shift to achieve.”

Further reading: 

How you pay for the City: episode one review

Mark Carney: finance that becomes disconnected from the economy is ‘useless’ 

A dark magic: looking at the impact of high frequency trading on financial markets 

We need investment to return to its patient evolutionary path

There is a disconnect between investment and the real world

The Guide to Sustainable Investment 2013


Will Self-Driving Cars Be Better for the Environment?



self-driving cars for green environment
Shutterstock Licensed Photo - By 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 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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New Zealand to Switch to Fully Renewable Energy by 2035



renewable energy policy
Shutterstock Licensed Photo - By Eviart /

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.


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