The second principle states that signatories will “be active owners and incorporate ESG issues into our ownership policies and practices.”
In the beginning, owner-managers ran their own businesses using their own money. Then a group of persuasive entrepreneurs sold shares to people they knew. This allowed them to raise funds so they could invest in more capital. In turn, this meant that they could afford to grow their businesses faster than they could grow on their own.
Over time, the business-owner-investor relationship became more distant as owners delegated the running of their organisations to a managerial bureaucracy and allowed those managers to run their investments and businesses. Finally, they spread their risk over multiple ventures in multiple sectors across multiple territories through multiple money managers. This meant their ‘ownership’ of any one organisation was reduced to fraction of a decimal of a Percent, often held for a short fair weather period and with no interest in the actual function of the company.
For the time being the active owner was dead, apart from in small to medium sized enterprises and some very rare large ones. Business strategy and management was devolved to a managerial bureaucracy whose own tenure was often short-term and whose sole goal was to maximise profit by all means necessary, in the time they had.
This model seemed to serve society tolerably well as our own economy grew, shareholders earned dividends and saw the value of portfolios rise, households became more affluent and there was plenty of stuff to go round.
Then in 2007 the system failed catastrophically, as it had failed with remarkable regularity over the previous eighty years.
Prudent checks and balances in the system had been abandoned in the 1970s and 1980s. Capital had become hypermobile across industries and borders. Financial speculation became an end in itself, rather than a means of creating real investment in real businesses. In the pursuit of profit, any remaining responsibilities to the environment and societies from which these companies emerged were forgotten. Costs like environmental protection, expensive home-grown employees or the taxes that housed, educated or healed them had to be avoided.
There were to be no limits to growth. Institutional investors and the managerial bureaucracy conspired to game the system to their advantage. They sat on each other’s remuneration committees, owning stakes in each other as a cosy cartel. This allowed them to guarantee escalating rewards regardless of business or share performance. The owner or individual investor was side lined, alongside the home-grown employee and customer, as their stakes in the businesses became irrelevant against the scale of financial speculation. By 2010, for every £1 of real trade, £26 was speculated financially.
There are some who would argue that this failure of capitalism is systemic and inevitable. To a certain extent they are right, markets are unregulated and if shareholders can or wish to, they can exert no influence over their holdings. If management bureaucracies are free to ignore shareholder votes, they will. However, those who see the failure of capitalism as a good thing tend not to live in the countries that been recent beneficiaries of free trade, or have a very weak grasp of history and the downsides of alternative systems.
But capitalism and the foundation of equity investment both need to return to their mercantile and innovator roots. Owners of companies, the majority of whom are institutional investors, need to exert greater influence over, and engage with, their holdings’ managerial bureaucracies. They should demand higher performance, environmental, social and governance standards. If for no other moral or ethical reason it will protect their investment in a resource scarce, polluted, less stable world.
As individual investors, we can demand that those funds we invest in exert this influence, or not invest in them. We have regularly argued that we live in an incredible time of limitless information and connectivity. If you are lucky enough to have a portfolio you have three votes in our economy compared to most people’s two – as a voter (every five years or so), as a consumer (every day) and as an investor (at least every March), whether directly or through a proxy.
Tomorrow we move onto disclosure.
Will Self-Driving Cars Be Better for the Environment?
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.
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.
New Zealand to Switch to Fully Renewable Energy by 2035
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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