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‘We need a radical shake-up of the banking system’

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What is next for the banking sector? How can we spell an end to the irresponsible and unsustainable activity that goes on? One man charged with formulating a business response to these questions and more is Lawrence Tomlinson, entrepreneur-in-residence at the Department for Business, Innovation and Skills (BIS).

A born and bred Yorkshireman, Tomlinson started out as an engineer working on crankshaft damper prototypes. After taking over the family business, a small group of care homes, he founded the LNT Group, which now includes racing car manufacturing company, Ginetta Cars, LNT Solutions and Ideal Care Homes.

Situated in a factory in Garforth, on the outskirts of Leeds, the LNT Group HQ is Tomlinson’s main base, but his experience in entrepreneurship has taken him a little further afield. The 151st Briton in the Sunday Times Rich List was appointed as entrepreneur-in-residence in April, and advises business secretary Vince Cable on the UK economy.

The £10,000 “salary” for Tomlinson’s role, however, is put to good use: he is offering it as a prize to the person who can come up with the best idea to kick-starting the UK economy and boosting growth.

Click here to read The Guide to Sustainable Banking 2012

We’ve had some rather interesting proposals – some more serious than others”, he says from his office in Garforth. “One entry simply said, ‘Sack George Osborne’.”

Joking aside, there is a vital underlying theme to Tomlinson’s competition – and that is the need for growth in the UK economy. He recently told Blue & Green Tomorrow that it was “time for growth, not greed”. His comments came as he was delivering a dossier of evidence to Cable, outlining “abusive bank practice”, where small businesses were being crushed by the big banks.

The dossier also contained evidence from ex-bankers, who had left the industry because of pressures from the heights of their institutions. One said, “The idea was to lend as little as you have to in order to remain ahead of your competitors but make sure you got as much out of it as possible.”

But why was this ever allowed to happen?

Tomlinson says, “When you have a small number of banks monopolising the markets, there is no incentive for them to sharpen their pencils and help people out. One of the biggest barriers to growth in the economy is access to finance – or rather the lack of it.”

One of his greatest concerns was, as he called it, the oligopoly that big banks such as Lloyds and the Royal Bank of Scotland (RBS) have over the banking sector. So he is calling for greater competition.

“It is generally believed that [the big banks] lend about 60% of all loans to business, so there isn’t much they want to do to help businesses grow”, he says.

Although regulation is a much debated issue within financial services, it plays a hugely important role in holding bankers on a leash. Their irresponsible behaviour, which is often rewarded through excessive bonuses and remuneration payments, must be curbed in order to reinstate the trust and confidence in our banking sector.

It is all too often forgotten by some bankers that there is a world beyond the banking world – the real economy – and this is made up of real people with real needs. The motivations of some of the ‘professionals’ that work in the industry are often misaligned with the needs of the society beyond the square mile, but how can this be changed?

“We need a radical shake-up of the banking system, and in particular the culture”, says Tomlinson.

“The banks need to be smaller, which is why I would like to see the big two banks, Lloyds and RBS, broken down into six smaller banks. By selling off other parts of the bank which are not key for lending, such as the investment bank or private equity business or other non-UK businesses, we can use the sale proceeds to fully capitalise these smaller, more accountable, retail and business banks.”

The result of this would be, if handled properly, an increased scope for competition within the marketplace, as well as a more personal relationship between the banker and the customer.

At Triodos Bank’s recent annual general meeting, UK managing director Charles Middleton told attendees of the banking model of some South American countries, where bankers spend a few hours a morning at their desk, making notes and dealing with administrative tasks. The rest of their days are then spent out in the communities, with their clients, getting to know the people, their businesses, their families, their competitors, and of course, the investment risks that they will ultimately be taking.

Although Tomlinson does not advocate personal banking at this level of intimacy, the principles behind the model in which he is calling for are similar in nature.

The next issue that Tomlinson proposes to address is the issue that ultimately led to the banks being bailed out by the taxpayer at the height of the financial crisis: “If a bank is too big, then it is too big to fail, because it will bring the rest of the economy down with it.

“These six new smaller banks should not be allowed to be gobbled up, merge or amalgamate. If it fails, then we won’t have so much of a big issue on our hands.”

But now the taxpayer has joint ownership over Lloyds and RBS, Tomlinson warns that a hasty sale could be a mistake, saying, “What if, a number of years down the line, the share price increases six-fold? Wouldn’t it be good to keep that as a national asset instead of palming it off to private ownership too early, having absorbed all the risk and taken none of the return?”

Although the first phase of the sale of taxpayer shares raked in £61m for the public purse, is it really worth it for the risk that was taken?

It is a good thing that we have straight-talking people such as Tomlinson advising politicians in Whitehall. He speaks not only in the interest of business, but ultimately in the interest of the whole economy.

If we are to kickstart sustainable growth, we certainly need a banking system that supports small businesses and the real economy, and the one that we have at the moment unfortunately does not.

Further reading:

Millionaire entrepreneur calls for ‘growth over greed’ in banking

British banks use less than half of their assets to fund the real economy

‘Shocking and widespread malpractice’ should land bankers in jail, says commission

Majority of Britons want to see guidelines to end irresponsible banking

The Guide to Sustainable Banking 2012

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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