cop
Stone building in the sand by a power line cop

Desertification is one of the key consequences of climate change

With COP 28 just days away, Commonwealth Secretary General Baroness Scotland and Deutsche Bank’s Markus Müller speak about the need to prioritise implementation of climate goals at the critical global conference. In a conversation moderated by LUX Editor-in-Chief Darius Sanai, the Secretary-General and Deutsche Bank executive underscore the need for collective action for climate reversal on the part of the international community to counter an increasingly urgent crisis
A woman wearing pearls, a black top and patterned scarf over her shoulder

Baroness Scotland

LUX: What are your hopes and expectations for this COP?
Baroness Scotland: My hope is that this COP will be the implementation COP. If you look at the COPs which have preceded it, you will see that there has been an awakening of the understanding about how urgent the danger is.

We have been talking historically about the existential threat for many of the members of my Commonwealth family. But that threat is not a threat: it is here. It is omnipresent. The “1.5 to stay alive” slogan is not a slogan, it is a reality. At the moment, 1.5 is on life support. We must give it the oxygen it needs. It means the difference between whether some of our small island developing states will continue to exist, or whether they will disappear.

Although it is encouraging to hear Australia say that they will take the people from states which are subsumed by the sea, such as Nauru, this still means that their traditions and cultures will all be gone. Their graveyards will be at the bottom of the sea after thousands of years of existence.

My aspiration for COP 28 is that we will deliver on the promises we will make. The $100 billion a year by 2020 that we were promised in 2009 still has not been delivered. It has to be delivered.

LUX: The richest countries are good at words, not implementations. What needs to change in order for that to be delivered?
BS: One change that has already happened is that businesses and the private sector are now intimately involved in the delivery. If you look back at previous COPs, even in 2016 there was still a debate as to whether climate change was real. There was a debate as to whether we would go green and blue in terms of energy. There was a debate about loss and damage. Those questions have been answered. If you look at what happened in Glasgow, the idea that the private sector would not be intimately involved in order to deliver the solutions is now unthinkable.

Second, which I have been saying for a while, we must recognise that human genius got us into this mess, and will now have to get us out of it. If you look at the industrial revolution, it was amazing, but that brought more devastation climatically than anything else. Human genius will have to get us out again. Some of the extraordinary developments – such as geo-spatial data – will allow us to better understand what is happening, and therefore, perhaps, how we can reverse it.

Large palm trees in the sand

Oases in North Africa are disappearing as the Sahara spreads northwards due to climate change

A third change is that we have accepted that this isn’t just about adaptation and mitigation. When I first said in 2016 that we needed a regenerative approach to development which would reverse climate change, people thought that I was crazy. Now, everybody accepts that we need a regenerative approach – one which adapts, rather than just mitigates.

A man wearing a white shirt and black suit

Markus Müller

LUX: Markus, as an economist and also someone who has said things that some people might have considered crazy at the time, but end up being true, what is your perspective on this COP?
Markus Müller: I think that this COP will be crucial. I completely support what Baroness Scotland has said. If we do not recognise what it takes now, it will be very difficult further down the line.

First, the Global Stocktake, which will take place for the first time at this COP, will reveal some uncomfortable truths. We will hear, for the first time, how far we are behind our plans. I hope and I think that this will be an awakening moment.

Secondly, we need to get a better understanding of global finance. Perhaps I am biased, but if we do not give the global financial market a role to play in this transition, then it won’t happen. The states alone will not be able to do this; we need the capacity of global finance – be it through risk pooling, or through its distribution channels of money, location and distribution – so that we can work on these devastating aspects.

From the perspective of an individual country, their financial needs are huge. From a global financial market point of view, this is more manageable. We have been speaking about this for years, but no solutions have been delivered so far. We must listen to financial institutions. We have the tools. Together, we are powerful, but in terms of negotiation, business, and finance, the right angle is missing. In this COP, finance is crucial, and then – of course – the transition discussion.

LUX: Have the opportunities for financial institutions to work with Commonwealth nations and governments changed in the last couple of years?
MM: We have always had excellent relationships with the countries of the Global South and Africa. However, as we see real world climate changes, financial needs are changing too.

It’s no longer about financing the past, the traditional infrastructure and traditional energy supply. We now need to finance the future – and this is something which is still missing. The vision of how the future could look is not there. We should ask ourselves, “What should we have done in order to be healthy in 2050?” as if we are in 2050 already, so that we know which direction we should take.

This discussion should take place in financial institutions. President Macron said this very clearly. We have the International Monetary Fund (IMF). We have the World Bank. We have these huge international institutions. But we need to be ready for the 21st century.

BS: We must also help them better understand debt, and to view the whole thing as an ecosystem. Up until recently we have looked at each element as a hermetically sealed, self-contained issue. But they are absolutely not.

A mosaic of white stone walls in the sand cop

With global warming making desert margins unlivable, population flight is devastating communities and leading to refugee crises

When I started at the Commonwealth, we said that we needed a regenerative approach to climate change. That meant that we needed to do more on the ocean, so we began the Commonwealth Blue Charter. One of the things I really want is to increase the amount of money going to oceans, because it is absolutely unacceptable that about 0.01% goes to oceans. We are a blue planet, we’re not a land-based planet and to actually be putting almost nothing into what makes up the majority of the world is just crazy.

It is crazy that we are not using our intelligence better. Our Climate Finance Access Hub in Mauritius has mobilised $7.8 million dollars: we are talking about peanuts. We have deployed 19 climate finance advisors across Africa, the Pacific and Caribbean regions. We are working together with those advisors, and they have already delivered $316 million into the hands of the small states with more than $500 million in the pipeline. But I do not have the money to put a climate finance advisor in every country. I wish I did.

We have seen that these applications for international climate funds are taking too long to make. For some of our LEDCs (least economically developed countries), it will be two to four years before they get the application through. However, our most recent application for five countries, took less than a year, and we got $63 million. Why? Because in the last 7 years, we have honed the process. So when we look at loss and damage, we cannot put in the old-fashioned, useless system. We have to put in a speedy, effective system which will get people the money to make a difference. Bit by bit we are changing it.

But we need debt swaps. We need a good carbon market. We think we are within touching distance of doing that, because using satellites and geo-spatial data, we are within touching distance of understanding how much every tree on the planet can sequester. We will then have the granularity to have a real carbon market, based on real, concrete estimates.

That could be a gamechanger between the North and the Global South. The Global South still has the majority of the lungs of the world, which they are being asked to maintain – but nobody is paying them. If we can get a real carbon market, that means it will be possible for us to do the reversal in the Global South to keep us alive.

A water tower in the desert

Water towers in Morocco bring together local people for their construction and maintenance and create a common community dedicated to their sustainable use. When the water dries up, due to desertification, community bonds are broken – a pattern repeated in climate-related environmental developments around the world

MM: I can agree. We have been starting to understand the nature topic better. Nature is a very valuable collateral, because it creates ecosystem services on which we all depend.

BS: It is remarkable how much has changed between when we started the Blue Charter Action Group and now. We worked with them on corals and, now, understanding the role that they play in restoration has improved globally. I have just returned from the Maldives, where I was looking at mangroves, which are huge in terms of sequestration,  for and protecting coastlines. That conversation was not even happening six years ago, but now it is critical. The Maldives want to restore their mangroves. But the degradation is already there and, unless we do this quickly, it is not going to change.

MM: We must convince those who retain traditional thinking about these areas. This is a big hurdle, but if we activate the right players to do this, the solutions are there. Two years ago, we joined the Ocean Risk and Resilience Action Alliance (ORRAA), and moved with speed. Perhaps we did not do enough with regards to concrete finance, but we wanted to understand the matter first, before unleashing the power of our balance sheet.

BS: The way in which I have been approaching this from the moment I came into the Commonwealth was to ask this: “Where do we want to be in 2030? What are the outcomes?” We’ve been saying, if that’s where we want to be in 2030, what do we have to do three months, six months, nine months, a year, two years, three years? Although other people thought it was crazy, we were right.

Those of us in positions of power now need to understand that we will all be on the same indictment. History will look back and say, “tell me their names. What were they doing? What were they thinking? Why did they not move at a time when it was possible?”

But the reason why I’m confident and determined is because humanity is always at its best and its most ingenious when our backs are against the wall. And right now, globally, our backs are against the wall.

MM: This is the interesting thing about development. You need to have a decent degree of scarcity for development to really kick off. It’s sad in one way, but it’s also a very convincing catalyst for change.

A burned and deserted car in the sand by a wall

The aftermath of a August 2020, wildfire which burned houses, date palms, orchards, vegetable gardens and more than 400 heads of cattle in the oasis of Tighmert in Morocco.
The increase in temperature and water stress has a considerable impact on the vegetation of the oasis, which, dried out, becomes more likely to catch fire

I also think that this discussion that we are having is proof that we are anticipating what’s going to happen. All backlash against ESG or sustainability are, for me, a signal that ESG and sustainability are being seen as a priority – otherwise we would not be discussing them as intensively as we are now.

LUX: Are developments around the world down-grading consciousness of what needs to be done around sustainability and COP?
BS: I think we woke up and smelled the coffee during the COVID pandemic. There is almost no one I know who was not affected either directly or indirectly by COVID. Most of us know someone who died, someone who was badly affected and/or we ourselves suffered from the deprivation, the mental stress, etc. I think it made a lot of people wake up and think, “What is life all about? What do I value? Am I sure I’m going to have it tomorrow?”

The other thing it did was emphasise the fact that unless we make sure others are safe, we won’t be safe and the people we love won’t be safe. The madness that we’re going through globally at the moment, the fact that every region of our world seems to be under threat, is making this fact even more omnipresent. It’s a tangled web of interlocking crises, and that’s what makes this time so volatile, so dangerous. If we don’t have a world, all the other things are not going to matter because we’re not going to be here.

I think for those in the Global South, this has remained the number one priority. What’s interesting is the agenda is being raised in the Global North, because the number of climatic disasters in the Global North is finally rising. Before, people would say the crisis had nothing to do with them. But when your coastline has been battered, when countries that have never seen a hurricane are suffering them, when trees are falling and floods are happening, when ordinary people’s lives in western cities are being made conscious of climate change, now it’s something people want to talk about.

MM: We know that cooperation is a very shy and very sensitive creature. Not being collaborative is not the superior strategy, it is the naive strategy. The smartest strategy is collaboration, but collaboration only works if there is a mutual dependency on it. This is exactly what Baroness Scotland just described; we now have a mutual dependency which is becoming evident and measurable.

A man holding a dead tree in the middle of the desert

A global temperature rise of several degrees, which the world is on track to suffer over the coming decades, would make this land uninhabitable

How can we solve the biggest problem humanity is facing? I believe in nature. Nature is stronger than humans, and it is currently taking back what humanity has taken. We need to be humble, but also use this as a tool for prosperity, because we need prosperity in order to survive and to create social stability. This also goes back to the aforementioned human genius, and to nature’s genius. Let’s activate this and let’s get there.

BS: And just think about the technological changes we’ve gone through in the last year. AI and digital and machine learning is enabling us to do analytical work exponentially faster. Before, you would have to do computations, which would have taken you 5-6 years. We’re now able to do the same computations within the space of weeks.

In the Commonwealth we’ve created and launched an AI consortium to look at the needs of small and developing states in particular. There are 42 small states in the world and we have 33 of them; if we can address the needs of those small states, this becomes a microcosm that we can use to solve many other problems. This interconnection and understanding that what works for one of us could work for all of us, is particularly powerful and why I am so delighted that the Commonwealth of 56 is being used as a kind of petri dish. We’ve got all regions: rich ones, poor ones, landlocked, island states, developed, all faiths. Therefore, if we can work something out that can work for our 56 countries, it is likely that it could become a pathway for the rest of the world.

LUX: What would be a satisfactory, realistic COP?
MM: I think what would make me satisfied is, first of all, to come to a joint conclusion on how to phase out fossil fuels in a way that this transition provides further prosperity for our countries and societies.

Secondly, I would say that this COP would be a successful COP if we were to get an agreement on how to finance the inclusion of the Global South in the economic and sustainability transition processes. The Loss and Damage Fund was meant to be this tool, but there is no money behind it. We need to get this signed by all nations.

Finally, I would love to see that nature as a whole, be it the ocean or biodiversity, gets closer to the climate discussion this COP. We must use tools like carbon credits and biodiversity credits to transfer the money from the users to the object or subject to be financed. For example, rainforests are our common goods to sequester carbon, to really get the finance mechanism working.

A man looking for water in a well in th desert

Climate change means that in some areas, water resources have vanished, while other lands are disappearing under increasingly acidifying oceans due to rising sea levels and higher CO2 levels

BS: I agree, and that really means we will have created a regenerative model of sustainable change to deliver climate reversal at this COP. That’s what we need. We also need – and I think we will hopefully get it – an understanding that this is a multifaceted, multidimensional approach needed by everybody. It will be business, it will be foundations, it will be individuals, it will be governments, it will be led by all of us.

Markus is right. We’ve got to get the money right, and there is no point in making promises that are then not kept. We’ve got to focus on action and what that action is going to be and by whom. I think the most important thing is to be honest with ourselves and with each other as to what this quantum leap, this paradigm shift, is going to mean for each of us. And then we have to do it.

MM: I see this COP as a gym, as a fitness centre, where we all struggle and get ready for the next step. I don’t know how much weight I can lift, but at least I’m training, right?

BS: And instead of doing the hundred metre dash on our own, we’re on a relay and everybody knows which run they have to make, where the baton is and who to give it to. There’s an understanding now that unless we run as a team and we connect, we’re all going to lose. If anybody drops the baton, it’s over.

All photography in this article from the series ‘Before it’s gone’ by M’hammed Kilito, winner of the 2023 Photography Prize for Sustainability, as featured in LUX

The 28th Conference of the Parties of the UNFCCC (COP) is set to take place between the 30th November and 12th December 2023

Baroness Scotland is the 6th Commonwealth Secretary-General

Markus Müller is Chief Investment Officer of ESG & Global Head of Chief Investment Office at Deutsche Bank’s Private Bank

Find out more: unfccc.int/cop28

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crashing waves
crashing waves

From David Eustace’s series ‘Mar a Bha’, which translates from Gaelic to ‘As It Was’

The investment community is waking up to the opportunities in our oceans. Impactful ethical investments in the blue economy can involve plastic waste prevention, sustainable seafood, maritime transport, eco-tourism and more

Photography by David Eustace

DEUTSCHE BANK WEALTH MANAGEMENT x LUX 

Robert Goodwin was on a mission to solve Haiti’s cholera problem. For nine years after the island nation’s devastating 2010 earthquake, periodic cholera outbreaks started hurting communities, doing the most damage to people with limited access to clean water and sanitation. The country’s clogged water canals were to blame for spreading the disease. Goodwin, the former CEO of Executives Without Borders, started looking at why the canals were so clogged. “I’m a root-cause guy,” says Goodwin. “I knew that cholera was a water-borne disease and saw that flooding was causing all the transmission. When I looked at the canals and what was causing the flooding, I saw that it was a lot of plastic trash that could have been recycled.”

Follow LUX on Instagram: luxthemagazine

Haitian communities could recycle materials such as metal and aluminium, but there was little in the way of plastic recycling infrastructure. So, Goodwin started a business, paying local people to pick up plastic trash and then sort it by colour, weight and type. They were paid cash on the spot. Goodwin’s efforts eventually grew into a new company, OceanCycle, a New York-based social enterprise aiming to help businesses integrate ocean-bound plastics into their products and improve traceability across the supply chain. (Ocean-bound plastic is the waste from areas in close proximity to the coast, where cutting off streams of plastic before they reach the ocean is most critical.) Companies such as OceanCycle are part of the growing blue economy, which the World Bank defines as the “sustainable use of ocean resources for economic growth, improved livelihoods and jobs, while preserving the health of the ocean ecosystem”.

“We want to turn off the tap,” says Goodwin. “Once the plastic has been in the water for too long it breaks down and it’s harder to recycle. If we want to stop the flow of any new plastic into the ocean by 2030 we have to put a value on recycling ocean-bound plastic.” Consumers around the world are more interested in ridding the ocean of plastic than they have ever been. More than 90 countries have placed some kind of ban on plastic bags, straws or other single-use plastics. The Ellen MacArthur Foundation predicted in 2017 that unless things changed the ocean could contain more plastics than fish by 2050. Consumers wanting to protect the ocean are becoming an incentive to create a now fast-growing market for cleaning up ocean trash. Sportswear company Adidas has teamed up with non-profit Parley for the Oceans to sell trail-running shoes made with ocean plastic, Method makes dish-soap containers from plastic picked up on the beaches of Hawaii, and Patagonia is making jackets from yarn derived in part from fishing nets. But plastic is only part of the new blue economy.

Approximately 70 per cent of our planet is covered by water and the ocean is a critical resource providing food for three billion people around the world. Seaweeds and miniscule ocean plants known as phytoplankton provide more than half of the oxygen we breathe, according to the US National Oceanic and Atmospheric Administration. There are approximately 680 million people around the world living in low-lying ocean areas, and the blue economy, which includes tourism, fishing and shipping, generates $3 trillion of economic output each year, according to the United Nations. All told, the services provided to humanity by the oceans are valued at $24 trillion and create a value of more than $2.5 trillion each year.

Read more: Deutsche Bank’s Claudio de Sanctis on investing in the ocean

But we don’t own the oceans or pay them for their services. “The ocean is not just a provider of value. It also helps us to digest the negative results of industrialisation,” says Markus Mueller, Global Head of the Chief Investment Office at Deutsche Bank Wealth Management. “There’s also a deep human attachment to our coastal regions. The ocean gives an emotional connection,” Mueller says. “People are divers and go on vacation at the beach. They’ve seen all this plastic in the sea.”

Beyond ocean plastic, the oceans have seen fish stocks depleted, coral reefs die and beaches recede as a consequence of human activity. It’s not a case of the tragedy of the commons, in which people who act in their self-interest spoil a shared resource. But, Mueller explains, the oceans “are more or less a tragedy of laissez-faire because they’re not governed. We need some governance around this to prevent tragedy and right now there is no incentive system that gives us the direction on what to do.” Some countries, including small island nations such as Seychelles, are issuing blue bonds that prioritise ocean health, and the Maldives is working to vastly reduce plastic waste. But governance is much needed.

A report published in September 2019 by the UN’s Intergovernmental Panel on Climate Change (IPCC) stated the world’s oceans are experiencing drastic changes. And these changes are not only impacting people and the planet but also placing the global economy at risk. The report highlighted the troubling changes occurring across oceans as a result of increased emissions from greenhouse gases. Oceans are absorbing 30 per cent of carbon emissions, making them a crucial resource in the fight against climate change. The report predicted that sea levels will rise by up to a metre by 2100, there will be markedly fewer fish in the oceans and stronger, more intense hurricanes will cause billions of dollars’ worth of damage.

sunsetting over the ocean

From David Eustace’s ‘Highland Heart’ series

Investing in the blue economy is just beginning, but it’s expected to grow at a faster rate than traditional investments. In 2018, the World Bank announced PROBLUE, an umbrella multi-donor trust fund (MDTF), with the goal of supporting healthy and productive oceans. PROBLUE is part of the World Bank’s overall blue economy programme, which takes a co-ordinated approach to ensure sustainable oceans and coastal resources. Focused on four key themes, the fund was created out of client demand, and to aid the bank towards a better understanding of the current and emerging threats facing the world’s oceans.

Most investments in ocean-related assets at this stage are privately held venture-capital or private-equity firms, and opportunities reach far beyond plastic-waste prevention, to sustainable seafood, maritime transport, eco-tourism and coastal adaptation.

“Oceans have played a critical role in mitigating climate change – they have stored 93 per cent of the planet’s carbon, and produce over 50 per cent of the oxygen,” says impact investor Shally Shanker of AiiM Partners Fund, based in Palo Alto, California. “Every second breath we take comes from the oceans. Ocean ecosystems are deeply interconnected with land and air. Yet, oceans remain a very underinvested sector.”

Read more: Kering’s Marie-Claire Daveu on benefits of the blue economy

Some of the blue economy-based investments Shanker is focusing on include sustainable replacements for plastic and Styrofoam, reducing antibiotics in farmed seafood and cost-effective data collection. Since three billion people depend upon the oceans for their primary source of protein, food security and growing protein demand are other areas of her work’s focus. Sixty per cent of new seafood demand is coming from India and China – two emerging economies each with populations of more than one billion. To identify viable replacements, Shanker says she is investing in plant-based and cell-based seafood alternatives. “Most of the problems in the ocean start on land,” she says.

Redesigning humanity’s relationship with the ocean is no easy task. There’s no choice but to start taking better care of the seas, because our economy has changed them. Coral reefs worldwide, for example, continue to be ravaged by bleaching. According to the International Union for Conservation of Nature (IUCN), the Great Barrier Reef in Australia and the Northwestern Hawaiian Islands saw the worst bleaching on record for three years in a row. “The Red Sea, where I grew up, is the most luscious sea on Earth because it is the newest sea,” says Ibrahim AlHusseini, an entrepreneur and environmentalist who has founded impact investing firm FullCycle. AlHusseini, a lifelong scuba diver, became an environmental investor 15 years ago when he noticed the sea was changing. “I would go back and go scuba diving and year after year there were fewer fish, less coral, less vibrancy and more plastic,” he says. “I just remember thinking, what is the point of accumulating all of this financial success if the things that I enjoy are fading away?” He spent a year studying ‘carbon math’, ocean toxicity and climate change, before deciding to invest in companies such as Synova Power, a waste-to-energy business that can create synthetic gas from plastic waste heated to high temperatures, and then harness it for power.

The ocean’s great resources could also hold a key to the best materials of the future. Seaweed, kelp and algae production was valued as a $55 billion market in 2018, but the market could expand to $95 billion by 2025. In Amsterdam, a start-up called Seamore is turning seaweed into bacon and pasta equivalents, while biofuel producers also use it. US-based start-up Loliware is creating compostable alternatives to plastic out of seaweed. “It’s plentiful and highly regenerative and sequesters carbon 20 times faster than trees,” says Chelsea ‘Sea’ Briganti, the founder of Loliware, which is developing nine products that use seaweed instead of plastic packaging material.

Investors who want to put money to work in service of the oceans should push companies to provide better data about their impacts, and also think creatively about what they do and don’t want in their portfolios, says Mueller. “All companies thinking about using natural resources are the profiteers from it. So, transparency is a key factor – if the impact of cruise liners and shipping companies becomes more transparent, investors can adjust.” There are new rules in effect in 2020, for example, from the International Maritime Organization to prevent atmospheric pollution from ships. Shippers are investing in scrubber technology and cleaner fuel, but data for investors about the impact of the changes is lacking.

The key to sustaining the oceans in the future is to rethink how humanity extracts resources from it. “We have to protect the value the ocean is providing rather than overusing it”, Mueller says. To make the blue economy work we have to replace old business models with more sustainable ones, then we have to put a lid on it.”

blue sky and ocean

Ocean Learning

As sustainable development in a blue economy develops, the first step is awareness: to think beyond the traditional extractive economy to a regenerative one. A blue economy improves biodiversity as well as food and job security for local communities, while limiting pollution and preserving the ocean’s role as a carbon sink. Here are some private organisations focused on blue economy education.

Lisbon Oceanarium

With its almost 1,800km of coastline, Portugal is using its historic relationship with the sea to show how the blue economy can aid economic growth. The Oceano Azul Foundation, led by José Soares dos Santos, is working with the Lisbon Oceanarium to teach future generations about ocean conservation and promoting the ethical values of using marine resources sustainably.

oceanario.pt

Monterey Bay Aquarium

The Monterey Bay Aquarium runs programmes on topics from cleaning up ocean plastic to how to restore the Pacific blue-fin tuna population. The aquarium, founded in the 1970s and supported by The David and Lucile Packard Foundation, has become a centre of various blue economy initiatives. Its Center for Ocean Solutions is searching for ways, such as protecting kelp forests, to fight climate change.

montereybayaquarium.org

Musée Océanographique de Monaco

The museum, located on the Rock of Monaco, highlights hundreds of species that live in the Mediterranean. The Monaco Blue Initiative, launched by H.S.H. Prince Albert II of Monaco in 2010, is focused on marine protected areas that can help conserve unique ocean species and habitats.

musee.oceano.org

Find out more: deutschewealth.com

This article originally appeared in the LUX x Deutsche Bank Wealth Management Blue Economy Special in the Summer 2020 Issue.

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