Jim Harris

Davos

Davos: Talking Champagne on a Sinking Titanic

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I am in Davos at the World Economic Forum (WEF) where the top issues that world leaders must address are: unstable global economy, eurozone fragility; and financial system instability. Climate change only ranks as the 7th issue. To me, it’s like a group of business leaders and “experts” on the sinking Titanic discussing the fragility of champagne sales. I am deeply concerned about the Alice-in-Wonderland perception of the environment’s big picture.

On the morning of Saturday, January 12 when I logged onto Facebook, a friend’s status update jumped out at me: “WHY DO MEDIA FAIL TO DISCUSS OPENLY THE SIGNS OF CLIMATE CHANGE? IT”S NOW 12 DEGREES IN TORONTO, NO SNOW, AND THE SIGNS OF SPRING IN JANUARY ARE NOT GOOD FOR ECOLOGY, HYDROLOGY, OR HUMAN PROSPERITY.”

Later in the day the temperature rose to 15ºC, at 3 p.m. setting a new record according to Environment Canada.

It is deeply disturbing that we experience +15ºC in the middle of winter. And I am disturbed listening to the media commentary about how wonderful this warm weather is. A friend mentioned that the Magnolia tree in their neighbourhood was showing signs that it was about to bud. If this Spring weather continues in the middle of winter it will bud. And its flowering will be killed off with the inevitable return of winter weather.

The stability and predictability of the seasons is defined as “security” by many Aboriginal peoples. The changing of the weather on a global scale is bringing unprecedented, disastrous changes in human experience.

When I hear on the radio or in media how wonderful this mild weather is, I despair. Because to me it’s like people dancing as the Titanic is sinking, unaware of the impending consequences. And so the band played on… Yes, It is deeply disturbing. And frankly depressing.

In 2012 the sustained early spring-like weather during winter followed by the return of cold weather had a disastrous consequence for Niagara Apple growers as the trees budding were killed off by frost.

Wildly variable weather is having drastic economic consequences:

Munich Re, the largest re-insurance company worldwide, estimates that the final damage from Hurricane Sandy will top $50 billion — of which only half of the losses are insured. Never before has New York been hit by a Hurricane.

The drought that plagued the U.S. in the summer of 2012 was the worst since the 1930s. The consequence for farmers was devastating as the drought was combined with record-breaking heat. The consequence? An estimated $75-150 billion loss — making it the costliest natural disaster in U.S. history.

Australia has been plagued in January by the worst ever heat wave in Australian history — setting a new record of 40.3°C, for the highest national average temperature. The result? Wildfires have raged across Australia. And the temperatures have become so hot the country’s Bureau of Meteorology was forced to add a new color — deep purple — to heat maps to show areas that have exceeded all-time heat records. And it’s not just the interior of Australia that’s baking — on January 18, Sydney set a new a record-breaking 46.4ºC (115.5ºC).

Over the last 20 years, Greenland and the Antarctic have lost 4 trillion tons of ice.

Colony Collapse Disorder (CCD) is a phenomenon not well understood but colonies of bees are dying off. Causes are thought to be pesticides and cellphone tower radiation. The death to honey bees in North America would kill $15 billion of commercial agricultural crops.

So here’s my point: Just how many apocalyptic signs are required before global leaders get serious about preventing climate change and the preservation of natural capital? Apparently the answer is more.

I am in Davos at the World Economic Forum (WEF), which formally began Monday night. The top issues that world leaders must address, according to a survey of 1,500 experts in academica, business, civil society and governments conducted for WEF, are unstable global economy, eurozone fragility; and financial system instability. Climate change only ranks as the 7th issue — and then only for Climate Change Adaption, not urgently preventing the change in the first place.

To me it’s like a group of business leaders and “experts” on the sinking Titanic discussing the fragility of champagne sales. I am deeply concerned about the Alice-in-Wonderland perception of the big picture of what is happening to our world.

As one of my heroes, Thomas Berry, said: the earth economy is primary, the human economy a derivative. Bankruptcies in the earth economy are immediately followed by bankruptcies in the human economy. In other words, when there are no more Cod on the Grand Banks, Newfoundland fisheries go bankrupt.

In a ground breaking analysis in 1997 Robert Costanza and his colleagues estimated that the value of eco-services that the world’s eco-systems provide was $33 trillion— for instance the value of pollination that bees provide for free; the value that trees and plants provide by turning CO2 back into O2; and the value the hydrological cycle provides by raining — just to take a few examples. By comparison, the global cumulative national product was $18 trillion. In other words the value of the natural world far, far exceeds the value of the human economy.

Increasingly unpredictable, unstable, extreme weather events will drive increasing economic catastrophes. So if global leaders are concerned with economic stability, addressing economic fragility and building economic resilience, they should start with addressing the more fundamental issue first.

Signs of Hope

There are reasons for hope. One WEF report calls for $14 trillion of green investment in green technology and retrofitting.

The McKinsey Study Reducing US Greenhouse Gas Emissions: How Much at What Cost? highlights how 40 per cent of the CO2 cuts that were required to meet the Kyoto targets were highly profitable. I interviewed the senior partner in charge of the study — Jon Creyts. He pointed out that if the profit from these high ROI projects were invested in the next least cost solutions we could have got all the way to achieving the goals at zero cost to society!

Focusing on energy efficiency is not only highly profitable but will spur innovation, job creation and help businesses, homeowners and society as a whole cut costs and create energy and economic security. This is the point of a report entitled More Bang for Our Buck: How Canada can Create More Energy Jobs and Less Pollution. Every $1 million invested in oil and gas only creates two jobs, while by contrast investing in energy efficiency creates 15 jobs, and has the economic benefit of insulating business and homeowners from the inevitable rise in energy prices.

Another McKinsey study: The Case for Investing in Energy Productivityhighlights that the internal rate of return (IRR) for investing in energy efficiency is 17 per cent. I like to note that by comparison the returns for investing in the stock market over the long term is 10 per cent and real estate 16 per cent — the two vehicles that we’ve been told create the best long term results.

Globally, oil and gas receive $557 billion a year in subsidies according the International Energy Agency (IEA) and $700-800 billion a year according to the head of the United Nations Environment Program. Why are global governments subsidizing the most profitable industry in the world? Why are governments literally subsidizing climate change? I thought that subsidies were supposed to be for new emerging industries, not highly profitable, mature ones.

And so I question how relevant the discussions are at Davos when world leaders are addressing symptoms, rather than the root causes of the challenges we face. And our economic system is liquidating natural capital and recording it as income.

Jim Harris is in Davos at the World Economic Forum for the launch Corporate Knights’ Global 100 — the ranking of the 100 most responsible firms with a market cap of $2 Billion or more which are doing the best job of charting a sustainable path based on 12 key performance indicators. For more information see http://www.global100.org/ You can follow his live tweeting from Davos at @JimHarris

Original Article

Occupy Davos?

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“Severe income disparity” is the most likely risk facing business and political leaders according to the World Economic Forum’s Global Risk 2012 Report. This finding really caught me by surprise. So while the Occupy movement isn’t anywhere on the agenda, here at Davos, its impact has been very much felt.

 

There’s the published agenda for the World Economic Forum (WEF) this week in Davos — and then there are the elephants in the room.

“Severe income disparity” is the most likely risk facing business and political leaders according to the World Economic Forum’s Global Risk 2012 Report. This finding really caught me by surprise. So while the Occupy Wall Street movement isn’t anywhere on the agenda here at WEF in Davos, its impact has been very much felt.

“Capitalism, in its current form, no longer fits the world.” A statement from an occupy protester? No, it was uttered by WEF Founder Klaus Schwab. But it’s not a view that I have found widely shared by the 2,600 delegates here. The ultimate irony, of course, is that those at WEF aren’t even the one per cent — they’re the 0.0001 per cent of global corporate and political elites.

There’s a lot of talk about the European debt crisis, which centres on Greece. At the heart of it is the fact that wealthy Greeks don’t pay taxes; tax evasion is a national past time for the rich. In turn the Greek government’s austerity program will cut the benefits and pensions of average citizens. Here’s a warning: That’s the recipe for revolution. Average citizens won’t accept austerity programs if the wealthy aren’t pulling their weight. And the cascading impact that a Greek default will have on German and French banks will highlight just how interconnected the world that we live in is.

Erosion of Trust
The Edelman Trust Barometer shows that trust in financial institutions and banks is at an all-time low. That might not come as a surprise given the origins of the 2008 U.S.-led credit crisis.

A quick refresher: The subprime meltdown was caused by Wall Street investment banks selling securitizing mortgages (which was profitable). Then some of the very same investment banks made a killing by betting against these very same securities triggering the credit crisis. Then some of the very same financial institutions got hundreds of billions of dollars in bailouts, which some, like Goldman Sachs, in turn used to buy equities at drastically reduced prices, in turn making a killing and then paying huge bonuses.

The regulation of investment banks and markets (or the lack thereof) is the government’s responsibility. Ultimately these events have proven to be deeply corrosive to trust and in turn to faith in government. As the Sufi saying goes, “The eye cannot see itself.” How will Davos delegates, comprised of corporate and political elites, see that it is greed at the center of the problem?

What do all these have in common? At the heart of them all is the occupy critique: The privatization of public wealth and socialization of liabilities.

Unsustainable Consumption
I feel like someone on the sinking Titanic while the band played on. Few participants that I have talked to understand the depth of threats that I perceive we are facing globally and tectonic shifts that the limits to growth will ultimately force upon all governments and corporations.

If everyone in the world consumed as much as we do in North America, we’d need another three planets to provide. So clearly our lifestyle is not sustainable. In Natural Capitalism authors Paul Hawken, Amory Lovins, and Hunter Lovins document our wasteful industrial process of harvesting raw materials, manufacturing, and then landfilling. When you look at the cycle after six months, only six per cent of the raw materials are in use. In other words, 94 per cent of the total cycle is waste! For me there’s no deep understanding of this at Davos. When people talk of resource productivity, they’re thinking about tinkering with the system as opposed to wholesale transformation.

Another issue that hasn’t had much attention here is the fact that globally governments are spending $1.5 trillion a year on militarism (the U.S. is responsible for about half this amount) and $700 to $800 billion subsidizing oil and gas. So when issues like poverty, access to safe drinking water, combating malaria and AIDS are discussed here — in my mind I keep coming back to the mantra that it’s not a lack of resources to address these chronic problems — the central problem is a gross misallocation of resources.

So dear reader, while you won’t hear reports of these issues from Davos, you got to read them here.

Not to be Completely Pessimistic
There are reasons for hope. From one survey: A staggering 92 per cent of millennials (those born after 1981) believe that a company’s purpose should be measured by social purpose not just profit. This contrasts starkly with CEOs who believe that profit maximization is the goal of business. So if corporations want to attract and retain the best and brightest employees as baby boomers begin retiring en masse, they will have to focus on the social good to ensure their social license to operate. A large number of the participants at WEF are highly idealistic. One such group is the WEF’s Young Global Leaders.

Another trend that gives me hope is the dramatic rise of the influence of the Internet. A staggering 6.5 million people signed petitions in a single day opposing SOPA and PIPA — convincing a number of U.S. politicians to withdraw their support from the bills.

I would deeply appreciate your feedback and comments on this.

And I will write more about Davos in my next blog… so click on the RSS feed to be automatically notified about the next one.

Originally posted at Huffington Post