January 31 2020

World Cohesion

It is comforting frankly to see climate change take centre stage in Davos. Yes, it has been identified as one of the most grilling challenges that humanity faces, probably the root cause of our existence in the coming 20 years. It was high time.

Now it is evident that every company would need to come with business ideas to limit its own pollution. Some already started, such as Microsoft that is vouching for suppressing its entire carbon footprint by 2030, and even turning carbon negative after that. To make sure that good intentions hold, large financial institutions have started to nudge the corporate world to do the right thing. Larry Fink’s Blackrock and their $7tn investments will increase its emphasis on ESG, pushing others like State Street to follow suit.

Far from perfect, the ESG initiative offers 2 ways to looks at the climate change and even broadens it to social, and governance issues. Either investors could decide to avoid entire sectors or companies by suppressing them from their investment portfolio, or more subtly, they could simply favour the right attitudes towards change, and overweight investments in the best in class. The latter is in itself more progressive, as it stirs away from the myth that we could get rid of fossil fuels or change corporate practices overnight.

Importantly, it addresses a peril that we have started to see at work i.e. frugality. As people come increasingly aware of their carbon footprint, they start to consume differently (a good thing), but also to consume less (a potential economic danger). More dangerous yet, is the thought that having babies is actually the most environment-damaging act. We imperatively need to stir away from this Malthusian trap, which will also threaten our survival in a very real way.

Most importantly still, the Davos show, behind the glitters, is a living example that leaders can rally to a common threat, just as the current Coronavirus epidemic is getting global mobilisation. Now we’d also love to see such cohesion when it comes to tackling inequality, global trade, or peace.

We’re still far, as China burns 50% of the world’s coal, and cites global trade tensions, the imperative of economic growth, and their own objective to increase their world clout, as an hinderance to be more pro-active on the climate agenda…All it needs is more world cohesion still.

360 Advisory – Markets