Let’s talk about something that proves that short-sighted or wrong-headed decisionmaking in ESG is bipartisan. One of the incredibly unfortunate halo effects of the Ukraine conflict is the global food shortage caused by Europe’s breadbasket being at war and the sanctions limiting access to Russian natural gas (key source for fertilizer). In addition to placing at risk a large percentage of the world population that are already nutritionally insecure, it has the effect of driving up commodity and food prices in the developed West. As we have discussed in prior blogs and newsletters, the conflict has also destabilized the petroleum market because of Russia’s role as a petrostate. The US is effectively energy independent, or nearly so if we look at all of North America together, but no question energy prices are higher. So what’s an American to do in the face of a global food and energy crisis? The US administration has an answer – put food in your gas tank. The decision to move to E15, 15% anhydrous denatured alcohol in the fuel mix, for the Summer arguably makes the whole situation worse. Referring to the US Energy Information Administration, the ASTM D4806 specification for ethanol compatible with spark-ignition engines is produced by “fermenting the sugar in the starches of grains such as corn, sorghum, and barley, and the sugar in sugar cane and sugar beets”. The first chart is from the USDA Foreign Agricultural Service and shows just how material Ukraine is to the global food supply. The second from the USDA statistics service shows already how much US corn production goes to fuel. There is a whole additional discussion to be had about the sense or senselessness of grain and cane crops being turned into fuel, from the energy intensity of the chemical conversion to the natural gas used to make fertilizer to the diesel burned for farm equipment to the climate costs of unsustainable monocrop farming practices that strongly suggests shortening the path from drill bit to burner tip is more efficient. But right now, we are focusing on the fact the US could (profitably) ameliorate rising food scarcity and prices with the same agricultural products it is planning to ferment and burn to save 10 cents on a $5 gallon of gas at the pump.
On November 6th, we got a clever hashtag mention — #climateshot – and a “Global Action Agenda”: Increase investment in agricultural research and innovation to create more climate-resilient, low-emission technologies and practices; Focus at least a third of agricultural research and innovation investments deliver demand-driven solutions across food systems, to protect nature and limit climate change; Showcase successful business models and promote public-private partnerships that deploy these innovations on the scale needed to meet the climate and food security challenge; Forge consensus on the evidence of what works, and facilitate inclusive dialogue among food and climate champions around the world. A lot of the right stakeholders (160 institutions, NGOs, countries and companies) are at the table, and there are four key initiatives: “The 100 Million Farmers Multi-Stakeholder Platform, led by the World Economic Forum. The Global Research Alliance on Agricultural Greenhouse Gases (GRA) initiative, which brings countries together to find ways to grow more food without growing greenhouse gas emissions. The new CGIAR organisational structure, research and innovation strategy and portfolio of initiatives. ClimateShot allies from the impact investment community comprise over 20 investors, funders and initiatives, including innovative funds aiming to mobilise over US$5 billion in financing to transform agriculture for people, nature and the climate.” And that is where it all falls down. 20 investors, funders and initiatives and $5 billion in capital is not going to transform anything. (Re)Learning from our world indigenous communities how to shift, or shift back, to regenerative agricultural practices has the potential to address a major carbon problem while also making significant strides in stewardship of water systems, all the while feeding the planet and providing economic opportunity to individuals, families, communities, companies and countries. It starts at the grassroots. This graphic, courtesy of Marc Barasch and Green World Ventures, is a hand illustration of a regenerative approach to smallholder farming already employed in Nigeria which at scale addresses a myriad of economic, nutritional and climatological challenges. What is old is very much new again, and requires activation of those 100 million farmers as well as activation of sufficient capital, from far more than 20 stakeholders, to catalyze a global change.
Jair Bolsonaro isn’t there either. While the President of Brazil is not in attendance, the country is still represented, but one is forced to wonder what the degree of commitment is when the boss chooses not to attend for “strategic” reasons. On the positive side of the ledger, even with Bolsonaro’s absence Brazil signed on to the pledge between 100 signatory countries to end deforestation by 2030. And reinforcing our point about the real action being with private enterprise and not with government, dozens of global financial services companies also are committing to discontinue investment in and financing for businesses and other concerns engaging in or profiting from deforestation. Today’s charts look at the trends and patterns in Amazonian deforestation. Brazil made great positive strides over the past decade dramatically improving over the prior twenty years. However, with Bolsonaro’s election we observe a significant jump in activity in 2019, and expect similar increases in 2020 and 2021 (not yet reflected in the data). The second chart from NASA provides a visual representation of reduction in vegetation in the Amazon in a period between 2000 and 2008 to illustrate the patterns of destruction. Ironically, note that the pattern looks like leaf veins, propagating from main roads to local roads and spreading out into the forest until larger and larger tracts of land are cleared. Crops like soy account for much of the native vegetation cleared, and one of the biggest importers of Brazilian soy in the last couple years is China. No Bolsonaro. No Xi. Starting to see a pattern there too?
Between 21–37% of all greenhouse gas (GHG) emissions are attributable to our global food system, from agriculture and land use, storage, transport, packaging, processing, retail, and consumption. As increased GHG levels further accelerate climate change, warming over land is occurring at a rate faster than the global average, with observable impacts on the land system. Traditional agricultural practices and arable land misuse have contributed to the degradation of roughly 75% of the Earth’s land area.
In addition to land degradation, the European Commission Joint Research Centre estimates 36 billion tons of soil is lost every year (Moyer, 2020). Depletion of soil nutrients, due to various natural and anthropogenic activities, affects people and ecosystems throughout the planet, and is both influenced by climate change and contributes to it. Warmer temperatures and changing precipitation patterns alter the beginning and end of growing seasons, contribute to regional crop yield reductions, reduce freshwater availability, and push biodiversity toward an unforgiving cliff (IPCC, 2019).
Recent studies indicate we are facing a biodiversity catastrophe, with 1,000,000 species at significant risk of extinction due to the climate crisis and habitat loss (Moyer, 2020). The frequency and intensity of extreme weather and climate events have also increased due to global warming and will continue to increase under medium and high emission scenarios (IPCC, 2019).
That is not to say that all hope is lost. Amid an abundance of dismal facts and figures, our species maintains both the responsibility and the capacity to discontinue extractive and degrading land use practices and implement large scale restorative and sustainable processes. Regenerative agriculture is a systems approach to farming that builds soil health by supporting biodiversity to return carbon and nutrients back to the soil. It is a holistic land use practice that can involve diversifying crop rotations, planting cover crops, green manures and perennials, retaining crop residues, using natural sources of fertilizer such as compost, employing highly managed grazing and/or integrating crops and livestock, reducing tillage frequency and depth, and eliminating synthetic chemicals (Moyer, 2020). Agro-ecology systems (systems that incorporate natural ecological processes with agricultural production) have many rewards to society, including increases in local income and nutrition, as well as a drawdown of CO₂ back into the soil (Chainlink, 2021). Regenerative agriculture focuses not only on reducing the carbon footprint and ensuring sustainability, but also on going beyond conventional practices to reverse the effects and progression of climate change. Indigenous and local ecological knowledge often contribute to the development of restorative agricultural practices and can enhance resilience against climate change and reduce land misuse (Moyer, 2020).
Tune into our Wilde Capital Management ESG Week podcast: Day 1 – Regenerative Agriculture to learn more. In this interview with Marc Ian Barasch, author and filmmaker, we discuss the ideas behind applying regenerative principles to the business of agriculture, providing for greater abundance for a population of nearly 8 billion people, caring for climate, water, and other systems that are failing as we speak.
We held this week’s chart until today to coincide with UN World Oceans Day, which lines up well with SDG 14 Life Below Water as well as several other SDGs relating to climate, food and waste. The chart comes from the Food and Agriculture Organization of the UN’s 3rd assessment of global marine fisheries discards (2019), illustrating the thousands of metric kilotonnes of discard by ocean region. Although with a variety of supervisory regimes and certifications and consumer scrutiny the amount of discard and bycatch in commercial fishing is believed to be on the decline, the reality is that the overall annual volume is still alarmingly high. From bottom-feeders to apex predators, the incidental injury to or death of sea animals is not only cruel, it risks destabilizing a critical part of the global food system for humans and irreversibly disrupting an essential part of the global climate system. Consumers and companies can and should continue to exert pressure on seafood businesses to improve the sustainability of their supply chains because it is good for people, planet AND profit. #worldoceansday #bycatch #SDG14
Another trip around the sun leading to another Earth Day, our second of the pandemic. Amid all the trauma, last year we got a brief glimpse of what hitting the pause button on our use and overuse of the planet would yield. Fresher air, cleaner water, wildlife in the canals and in the streets. We conducted an unintended (and unwanted), all-in global experiment, and graphically demonstrated that the environment does have the capacity to respond to behavioral change on the part of humans.
Stopping everything isn’t the answer. But changing everything could be. This planetary test case provided strong evidence against the argument that global systems are too vast and too complex, and changing human patterns wouldn’t result in any sort of improvement. A change from extractive to regenerative processes in food, energy, materials, housing, and transportation among others not only can help address the challenge of sufficiency but also manage our footprint so we live with rather than just on Earth. There is still time to stop and possibly even partially reverse the mounting damage to atmospheric, oceanic, littoral, arborial and other global systems. The risk of not taking those steps is existential for humanity, and it is also bad capitalism. Wildfire, inundation, desertification, loss of pollinators, extreme weather, even glacial collapse have real economic consequences from interrupting supply chains to destroying value in the billions and trillions of dollars.
Moving to more regenerative businesses and communities will mitigate or even prevent some of these risks from manifesting, and will be more equitable and inclusive and result in more financial opportunity for individuals and entire markets. The best possible investment is one that both reduces risk and catalyzes growth at the same time. Caring for the planet we live with is also the best possible free option to get on that trade.
What happens when one ESG priority comes into conflict with another? This week we examine a chart from the World Resources Institute (www.wri.org) of data from the Servicio de Información Agroalimentaria y Pesquera chronicling a decade of growth in avocado production in Mexico. Avocados play on ESG themes of healthy eating, job creation and economic opportunity. Unfortunately, the explosion of consumption, primarily in the US as a result of NAFTA, of Mexican avocados has fueled deforestation, draining of aquifers, soil degradation, increased CO2 emissions, threatens indigenous species and even triggers small earthquakes. According to various studies assembled by the World Economic Forum, avocado groves consume multiples of the water of indigenous forest, and the fruit has an end-point carbon emissions footprint many times that of bananas. As with other monocultures like palm in Indonesia, avocado has brought economic opportunity to areas that badly need it like Michoacán province, but at a profound and unsustainable cost. Conscientious consumption and deploying capital to find more sustainable methods of cultivation without depriving Michoacán of needed money and opportunity are examples of where ESG is headed to address whole-systems challenges rather than focusing narrowly on single issues or ideas.
The popular, if you can call it that, view of rising carbon levels in the atmosphere is that the carbon problem is primarily an industrial problem. Oil, coal, and gas extraction and refining, power generation, factories, automobiles, chemicals, concrete, do all contribute to atmospheric CO2, and the trajectory of climate consequences tracks well with the Industrial Revolution. But what is far less well understood, but may be of much greater consequence, is global soil health. Modern agriculture, driven by feed lots, monocultures, tilling, chemical pesticides, and off-season bare soil has been systematically eliminating healthy soil as a global carbon sink. From an economic perspective what is really stunning is that these practices actually don’t result in more profit and productivity per acre for farmers. This week’s images are from Kiss the Ground, an initiative to help the world transition (back) to regenerative agriculture, which is better for both planet and profit. Become a soil advocate at www.kisstheground.com, and check out the documentary now streaming on Netflix. #kissthegroundmovie
“Global warming: the long-term heating of Earth’s climate system… due to human activities, primarily the burning of fossil fuels, which increases heat-trapping greenhouse gas levels in Earth’s atmosphere,” (Shaftel, 2020). The term coined decades ago has gained momentum in not only scientific communities and environmental organizations, but political campaigns and industry corporate governance policies around the globe. From polar ice melting and sea levels rising to extreme weather events, our changing climate has far reaching and compounding effects on the environment and ecosystems, our economies and industries, and our global food supply. One of the direct effects of climate change and global warming is ocean acidification.
To examine the process of ocean acidification and its impacts on human life, recall an adolescent science lesson on pH and water chemistry. The pH scale runs from 0-14, with 7 being neutral. Higher than 7 represents a basic or “alkaline” pH and lower than 7 represents an acidic concentration. For reference, household vinegar, an acidic liquid, has an average pH of 2.5, while tap water has an average pH of 7.5. The ocean’s current pH is approximately 8.1, which is basic (NOAA, 2020). How does the ocean’s pH tie into global warming and climate change?
The ocean naturally absorbs roughly 30% of the carbon dioxide that is released into the atmosphere. When seawater and carbon dioxide combine, carbonic acid is produced, lowering the pH of the ocean and increasing the acidity. As levels of carbon dioxide increase due to human activity (burning of fossil fuels, land-use change and deforestation, agricultural industries) the amount of CO2 absorbed by the ocean also increases. Plainly speaking, the more CO2 we produce and release into the atmosphere, the more acidic our oceans become. Since the Industrial Revolution in the 1700’s, increases in CO2 have resulted in a 30% increase in ocean acidity (NOAA, 2020). This present acidification process is occurring ten times faster than any previous changes over the last 300 million years (IUCN, 2017). The rapid acceleration of CO2 production significantly jeopardizes the ability of ecosystems to effectively adapt to the changes in ocean chemistry.
Increased ocean acidity especially affects organisms with calcium carbonate shells or skeletons including shellfish like coral, oysters, crab, and lobster. A recent study performed by the National Oceanic and Atmospheric Administration on the pteropod, a small sea snail integral to the ocean food chain, showed that the levels of ocean pH projected for year 2100 dissolve the organism’s shell within just 45 days. Furthermore, researchers have already discovered severe shell dissolution in pteropods naturally found in the Southern (Antarctic) Ocean, indicating the process’ rapid progression (NOAA, 2020). The pteropod snail is a major food source affecting members of the food chain from krill and fish to whales and seals. When we consider how each organism is interconnected in the food web, the loss of one species creates a cascading effect.
Unfortunately, the consequences do not stop there. Increased acidity has also been linked to a disturbance in scent transmission, inhibiting species from detecting predators and locating suitable habitats (NOAA, 2020). Acidification has also been observed to affect sound transmission, reducing sound absorption and increasing the ocean’s ambient noise (OAN). Increases in OAN can impair marine animals’ hearing and communication, increase stress and lower their immune systems, and even cause brain hemorrhaging or death in severe cases (Gazioğlu, 2015).
High Level Impacts
In 2018, the global fishing and seafood sector represented a USD 164 billion international trade industry employing 59.5 million people. 88% of the 179 billion tonnes of total fish produced in 2018 was for direct human consumption. Fish and fish products supply approximately 3.3 billion people with nearly 20 percent of their average per capita intake of animal protein. Furthermore, seafood provides many crucial nutrients to the human diet including long chain Omega-3 fats, iodine, vitamin D, iron, calcium, zinc, and other minerals. With key species like the pteropod in jeopardy, the entire seafood industry risks significant threat, exacerbating global hunger and malnutrition (FOA, 2020). Dying coral systems lack the ability to effectively buffer coastal communities from storm waves and erosion, and leave those communities to suffer consequences to tourism and commercial business (IUCN, 2017). Profits, careers, economies, biodiversity, ecosystem structure, shoreline integrity, and global food supply are all threatened if ocean acidification continues to accelerate due to increased CO2 production.
As managers of sustainable and responsible investment portfolios, our passion lies not only in providing ethically sourced returns for our clients, but in supporting positive impact-driven companies and communities. Conscious investing is achieved through selective avoidance of institutions that harm ecosystems or using the allocation of capital as a lever to change those institutions, in conjunction with focusing on institutions that provide regenerative and resourceful solutions to humanities’ needs.
Gazioğlu, C., Müftüoğlu, A. E., Demir, V., Aksu, A., & Okutan, V. (2015). Connection between Ocean Acidification and Sound Propagation. International Journal of Environment and Geoinformatics, 2(2), 16–26. https://doi.org/10.30897/ijegeo.303538
Every member of an eco-system, from vegetation to predator species, plays an integral role in the sustainability of that system. When one player is removed from the hierarchy, whether by result of climate change, pollution, human development, or natural occurrences, the effects are cascading. An often overlooked and yet essential vulnerable group of species is pollinators. Although bees and fruit bats are not the poster children for endangered species like tigers and elephants, their role in pollination facilitates an ecological process critical for the reproduction of wild flora and agricultural crops.
(c) 2020 P. Sorgi
According to the U.S. Department of Agriculture, more than 150 crop species in the United States, including blueberries, tomatoes, apples, bananas, and peaches, rely on pollinators annually. Alfalfa and other grain crops necessary to sustain livestock also rely upon pollination. Furthermore, more than half of the world’s diet of fats and oils are produced from animal-pollinated plants (sunflowers, almonds, canola, avocados). Honeybees alone are responsible for pollinating $15 billion in crops for the U.S. economy each year (Main, 2020). Plainly speaking, without pollinators, the globe’s future food security collapses.
Without pollinators, you can drop the dinner table conversation because there quite literally won’t be a dinner
So, where does the issue reside? According to Penn State University’s Center for Pollinator Research, since 2006, the honeybee population in the United States has declined 30-42 percent each year largely due to the impacts of climate change, habitat loss, and toxic pesticide use. Of the 65 species of flying foxes (fruit bats), 31 are threatened with global extinction (Vincenot, 2017). Protecting species of pollinators is not just the “right thing” to do; it’s compulsory for human existence.
As managers of sustainable and responsible investment portfolios, our passion lies not only in providing ethically sourced returns for our clients, but in supporting positive impact-driven organizations. Conscious investing is achieved through avoidance of institutions that harm ecosystems, in conjunction with focus on institutions that provide regenerative and resourceful solutions. [artwork (c) 2020 P. Sorgi]
