Chinese walker

The climate crisis results from a tragic misallocation of financial resources towards activities that fail to account for their environmental impacts. If we are to make the bridge to a secure climate future, then fresh thinking is urgently required on how to steer the world`s immense investment resources towards energy options that simultaneously deliver sustainability and decent returns for the world`s savers. The task ahead is daunting, but early signs are promising.

The total value of all the companies listed on the world`s stock markets now amounts to over twenty trillion US dollars ($20,000,000,000,000). To date, precious little of this store of financial wealth has taken account of the cost of carbon emitted from these companies` products and processes. And, looking ahead, business-as-usual projections from the International Energy Agency suggest that over $16 trillion will be invested in the world`s energy infrastructure up to 2030, mostly in fossil-fuel facilities, generating an additional 60% in greenhouse gas emissions. All indications suggest that this capital will be mobilised.

The multi-trillion dollar question is therefore how to mould those old financial drivers of “fear and greed” so that they work with the grain of a low carbon future rather than against.

This process has already started. The introduction of the European Union Emissions Trading Scheme on 1 January 2005 has transformed the way that financial markets value companies affected by the scheme. The scheme has created a new market in carbon dioxide allowances estimated at some Euro 35 billion (US$43bn) per year, potentially rising to over Euro 50 billion per year by the end of the decade. Investment banks now regularly factor in a cost of carbon into their valuation spreadsheets for affected sectors. For Chris Rowland, a leading City analyst, “it`s possibly the biggest change the European utilities industry has seen since the industrial revolution”.

The carbon caps might not have been as tight as many had hoped, but already the price for carbon dioxide allowances has risen from just Euro 7 in April 2004 to over Euro 28 in April 2006. This is equal to the UK government`s mid-point estimate of the actual damage done by a tonne of carbon dioxide of %26pound;19 (Euro 28).

It should be noted how easily financial markets absorbed this shift in costs. The sky hasn`t fallen in, and capital has started to move to those companies best positioned for a carbon-constrained future.

Climate change and the investment chain

Other parts of the investment chain have also taken action. The socially responsible investment (SRI) community has been at the vanguard of the shift. At my firm, Henderson Global Investors, we now see long-term growth opportunities in the companies providing solutions to climate change, whether in cleaner energy systems, efficiency enhancements or sustainable transport systems. In 2005 we also commissioned Trucost to carry out a pioneering carbon audit of one of our Sustainable and Responsible Investment (SRI) funds, which shows that incorporating sustainability factors into the selection of investments can yield real environmental benefits for investors.

More broadly, the Carbon Disclosure Project has mobilised 143 leading institutional investors to request improved disclosure on climate change from the world`s leading 500 companies. And at the recent Institutional Investor Summit on Climate Risk in New York, two dozen US and European institutional investors with over three trillion dollars of assets under management issued a ten point call to action. This urged pension funds, fund managers, companies, and financial regulators to intensify efforts to provide the analysis and disclosure needed to manage climate risks. The group also committed to deploy $1 billion towards business opportunities emerging from the drive to reduce emission.

These are all positive developments, but they will still be insufficient to tip the investment balance unless smarter policy frameworks are introduced. Even in the UK, where the government has developed a relatively sophisticated approach, the word “investor” is still strangely absent from its climate change programme. Certainly, making sure that the cost of carbon is reflected in commodity prices is a necessary step – and large funds, such as those backing the Institutional Investors Group on Climate Change now support the UK`s long-term carbon reduction target of 60% by 2050.

Markets and a climate-constrained world

But to be truly “joined up” from a financial perspective, policy should also address other parts of the investment chain. Financial regulation now lags behind economic realities. This means it is still possible for companies to list on the world`s leading stock markets without disclosing potential carbon costs and liabilities; this gap needs to be closed.

In addition, the duties of investors need to be brought into line with a carbon-constrained world. Managers of institutional investments – whether pension or mutual funds – are governed by the concept of fiduciary duty, ensuring that their decisions are prudently made in the best interests of the end-beneficiaries. This has commonly been interpreted as meaning the maximisation of short-term returns, without regard to wider social or environmental realities. The harsh facts of climate change – along with other sustainability threats – should prompt governments to modernise this interpretation. Inspiration can be sought by looking once again at the long-standing “prudent investor rule”, challenging trustees and managers to recast the ancient virtue of prudence in light of climatic realities.

Financial markets move on sentiment, and investors are now awakening to the deep risks associated with climate change and the potential opportunities in finding ways to respond effectively. By updating financial regulation and investor duties to take account of carbon, governments would not only make the achievement of climate goals more likely, but could also help secure stable investment returns at a time of a global pension crisis. The prize is clear, and it`s worth at least twenty trillion dollars.

Nick Robins is head of socially responsible investment research at Henderson Global Investors in the City of London.

The United Nations has declared 2006 as the International Year of Deserts and Desertification, in recognition of the grave perils of desertification, a global phenomenon affecting a third of the earth`s surface and more than one billion people in over 100 countries. As susceptible dryland areas lose their productive capacity, says the UN, desertification has potentially devastating social and economic consequences, including poverty, famine and political instability.

Acknowledging those connections, the UN Convention to Combat Desertification was established after the 1992 Earth Summit in Rio de Janeiro. The convention defined desertification as “land degradation in arid, semi-arid and dry sub-humid areas resulting from various factors, including climatic variations and human activities”, and is the first international treaty to address the issues of poverty and environmental degradation in rural areas. It also is the first pact, says the UN, to “recognise that grassroots resource-users are central to identifying and implementing solutions”; to involve local women as well as men in the development process; to stress the need for an integrated approach, and to call for a global mechanism to mobilise resources through partnerships. (At the 2002 World Summit on Sustainable Development, the convention was singled out as a key instrument for poverty eradication in dryland rural areas.)

Abstract:

The actual impact of global warming on humankind is unclear, instead of just being a Pandora`s Box which only brings misfortune to mankind, global warming, to certain degrees, benefits us in certain ways.

There is no absolute standard against which we can decide whether the temperature is suitable for living or not as it is very much decided by the adaptability of human beings. If human beings fail to keep up with the pace of temperature increase, then global warming will surely threaten our existence. Therefore, the problem is a race between humans and nature in terms of adapting to a new living environment.

Resources do not only include natural resources but more importantly knowledge and technology. From this perspective, the capital in terms of resources that will be owned by our offspring is much more than what we have now.

Compared with problems caused by natural resources, man-made problems are the biggest threat facing human kind. Therefore, sustainable development is more a social issue rather than an environmental one.

Biodiversity – or biological diversity – means the variety of life on earth, and is measured within species, between species and in the plenitude of ecosystems (the system of interactions between living organisms and their environment). In its biodiversity, China is one of the richest countries on earth. It is also one in which biodiversity has been most seriously damaged – and is still threatened.

With its huge population and long history of agriculture, China has been cultivating its vast territory for centuries. Forests and other types of vegetation were destroyed to clear land to cultivate more crops to feed more people. Wars and other chaos throughout China`s history have had their negative effects on the land and its life forms, and now climate change is playing a part. More recently, says China`s Biodiversity: A Country Study – labeled “a preliminary summary of China`s biodiversity and of the work needed for its preservation” — both the government and the public are more aware of the importance of biodiversity conservation. But threats to the country`s biodiversity legacy – one that is rich and varied, but also broken and incomplete — are still growing.

Forests, says the 1998 report — organised by China`s State Environmental Protection Administration (SEPA) and compiled with the support of the United Nations Environment Programme (UNEP) – have been “broken into small, fragmented areas”. Rangelands have been “overgrazed and severely degraded”. Animal and plant resources have been overexploited and overutilised. Atmospheric pollution, particularly in the form of acid rain, endangers plants, soil, lakes, fish and other resources. Invasive exotic weeds and animal pests have damaged indigenous life. Human activities, including tourism, mining and wetlands reclamation, produce a range of harmful effects.

As the report unequivocally states: “The survival of mankind cannot be separated from that of other species. Numerous plants, animals and micro-organisms provide indispensable human food, fiber, wood, medicine and industrial raw materials. %26hellip; The many beautiful and aesthetic life forms on the earth also give human beings much enjoyment. They are also sources of artistic creation and scientific invention. Most of the functions of living organisms cannot be replaced by other things. Today, man is modifying the features of the earth at an unprecedented rate. This creates raw materials for human survival on the one hand, but has changed the living environment of other living things, continuously decreasing biodiversity, and has led to the extinction of large numbers of species, on the other. The basis for human survival is gradually disintegrating and the protection of biodiversity is currently of worldwide concern.”

Experts, including the UNEP, consider China one of the earth`s 12 “mega-diverse” countries, ranking it third in the world for biodiversity in GEO-2000, the Global Environment Outlook, and first in the northern hemisphere. With more than 30,000 species of advanced plants and 6,347 kinds of vertebrates, representing 10 and 14 percent, respectively, of the world`s total (according to 1996 SEPA figures). Additionally, China is credited with 1,000 species of economic trees and more than 11,000 species of medicinal plants. Countless species are endemic to the country – ancient flora and fauna – and are both rare and endangered.

Washington-based Conservation International (CI), which works to protect the earth`s richest regions of plant and animal diversity, has identified 34 “biodiversity hotspots” globally. These are regions that contain at least 1,500 endemic species of vascular plants (greater than 0.5% of the world`s total) and which have lost at least 70% of their original habitat. Among the 34 hotspots on CI`s list are the mountains of southwest China, stretching over 262,400 square kilometers of temperate to alpine peaks between the easternmost edge of the Tibetan plateau and the central China plain. The mountains feed the most species-rich temperate and tropical river systems in Asia and “support a wide array of habitats, including the most endemic-rich temperate flora in the world.”

The region has evolved into “cluster of distinctive mini-hotspots,” each with its own unique flora and fauna, says CI, due to its dramatic differences in topography, climate and vegetation. The mountains are home to an estimated 12,000 species of plants, 237 of mammals, 611 of birds, and at least 90 each of reptiles, amphibians and freshwater fish – many of which are found nowhere else in the world. Two-hundred thirty rhododendron species – more than a quarter of the world`s total – are found there. So, too, is the richest variety of pheasants and their relatives – about 25 species – and, among mammals, there is the very symbol of China and of conservation: the giant panda. The animal, says CI, is “almost entirely restricted to the shrinking forests of this hotspot.” Other important mammals include the golden monkey, the Yunnan or black snub-nosed monkey, the takin (a large goat antelope), the Chinese forest musk deer and the snow leopard.

The World Conservation Union (also known as IUCN and based in Gland, Switzerland) is the world`s largest and most important conservation network. Among its functions is maintenance of the IUCN Red List of Threatened Species, a database recognised as the most authoritative guide to the status of biological diversity on the planet. It evaluates the extinction risk to thousands of species and subspecies. Its 2006 figures list 804 threatened species in China: 442 plants, 84 mammals, 88 birds, 34 reptiles, 91 amphibians, 59 fishes, 1 mollusc and 5 other invertebrates.

Deforestation – for agriculture, logging, dam construction, industry and human settlements – and climate change have played their part in the decline of China`s wildlife and habitats. So, too, has the destruction of grasslands and wetlands – such as the large freshwater swamps of the Sanjian plain in northeastern China. While habitats shrink, so too does the varied life of ecosystems.

And as Jared Diamond writes in his book Collapse: How Societies Choose to Fail or Survive, “Other biodiversity losses with big economic consequences include the severe degradation of both freshwater and coastal marine fisheries by overfishing and pollution, because fish consumption is rising with growing affluence. %26hellip; The white sturgeon has been pushed to brink of extinction, the formerly robust Bohai prawn harvest declined 90%, formerly abundant fish species like the yellow croaker and hairtail must now be imported, the annual take of wild fish in the Yangtze river has declined 75%, and that river had to be closed to fishing for the first time ever in 2003.”

As China pursues its aspirations to a “First World lifestyle,” the impact on human-resource use and the environment is certain to be immense.

Many people are put off openly adopting a strategy regarding climate change, giving reasons such as “There`s no evidence for it”, or “I haven`t felt a change in climate”, or “It`s just a small scale problem”. A report recently issued by the US National Academy of Sciences shows how far out of step such people are. It finds that climate change is now a leading topic of discussion among the world`s scientists. From universities to environmental NGOs, anyone who has the least connection with this problem is seriously worried.

Former Vice President Al Gore recently travelled across the United States giving a series of speeches in which he called the public`s attention to the extremely urgent danger of climate change, and the damage that it has, in fact, already caused. His presentation was prepared for him, very meticulously, by a think-tank, for which Gore serves as a leader with strong confidence in science and technology. Closely focussing on and promoting the notion of the “digital planet”, he consistently extolled science and technology as forces that lead global trends. Yet the current spread of global warming, and responses to it, were firmly on his agenda.

When scientists target deforestation, increases in carbon-dioxide emissions and flows of methane into the atmosphere, they are perhaps neglecting a further factor in global warming, namely heat pollution. Our extensive use of crude oil and coal not only releases large amounts of poisonous and harmful gases into the atmosphere, but also something invisible: heat.

Heat is emitted from factory chimneys, from the refining of calcium carbide and from car exhausts; by these means, heat is clearly being added to the air around us. This increases the heat-island effect in cities, and — due to population growth, rural-to-urban migration and urban conglomeration — certain of the world`s urban regions are now becoming ever-larger heat islands. Thus a quantitative change becomes a fundamental change. The world is quietly transforming because combustion is not only releasing dangerous gases but also transferring heat into the atmosphere. The snowy summits of the Alps are under threat, whether by the large number of visitors scaling the mountains or by the heat issuing from cities.

Controversy over energy reforms

Let me frame my thoughts in the form of a question: does California have a responsibility to the world to reduce greenhouse gases? Or, to put it another way, am I my brother`s keeper?

We would all agree that if we saw a child about to be struck by a bus, we would quickly remove the child from harm. But we allow diesel exhaust from that same bus – which raises infant mortality rates in California 40% and threatens the health of a child while it is still in its mother`s womb.

We would all agree that eating mercury in fish is not healthy for children or adults, yet our regulatory system in the United States permits coal fired power plants — and chlorine manufacturing plants, as the latest reports show — to pump tons of mercury into the air each day.

We would all agree that climate change will cause sea levels to rise and that we must replace fossil fuels with clean renewable energy. So why are the residents of Cape Cod [Massachusetts] opposing windmills offshore, claiming that it will harm their views? Don`t they understand that sea-level rise will wash away the homes with the multi-million-dollar views that these people are trying to protect?

These are but a few of the inconsistencies that state and national policy makers face in the United States when addressing complex environmental issues like global warming. But in California, many say, “We`ve done our part — must we also be our brother`s keeper?”

It`s true, that in the early 1970s, California faced a one-two punch of doubled oil prices and soaring electricity demand, with new coal and nuclear power plants projected every eight miles along the coast from San Diego to San Francisco. The plants never got built because of energy-efficiency breakthroughs in buildings and appliances. The state`s economy kept growing even though Californians on average consume 40% less energy than other U.S. citizens. In fact, in the past three decades, per capita national energy consumption rose 50% and in California it has remained level. Being so energy efficient means we also generate less volume of greenhouse gases than other states and nations.

So do we need to do more? We`ve made progress on things like energy efficiency and reducing air pollution, so how much more is there to do? Consider that 99% of our airis oxygen and nitrogen, which can be metabolized in the body, 1% is inert argon gas, which is not modified, but simply inhaled and exhaled. Because of the finite supply of argon, we share it with every other living thing on earth. Harvard researchers calculate that by age 20, we have inhaled argon atoms that were exhaled by dinosaurs, Confucius, Gandhi, Shakespeare and a Jewish carpenter from Bethlehem.

So what do we do with this arguably sacred resource? One-hundred percent of the airwe breathe is contaminated by man-made pollutants. We foul it with toxic stews bearing ominous acronyms like PAHs, PM2.5, BTEX compounds, and GHGs — which kill up to 100,000 people in the United States each year and cause more than six million asthma attacks, many in our most vulnerable populations: our elders and our children. And all of us suffer the impacts of climate change — directly related to air pollution: disease, lost snowpack, coastal and levee erosion.

The earth is unwell. While the planet`s vital signs are mixed, its temperature is clearly rising and its overall prognosis is worrying scientists who closely monitor its condition. Many believe that, as result of the climate change the earth is undergoing, urgent and unprecedented action must be taken if future generations are to inherit a secure and healthy place in which to live.

Global economic indicators are pointing upward, according to the Worldwatch Institute, which studies the complex interactions among people, nature and economies. In fact, the gross world product (GWP) — the total global value of finished goods and services — reached a record $59.6 trillion in 2005, nearly double the 1985 figure. However, says Worldwatch, despite upward trends in production, commerce and consumption, these indicators “are set against a backdrop of ecological decline in a world powered overwhelmingly by fossil fuels.”

In 2005, as GWP hit a record high level, so too did the average annual atmospheric concentration of carbon dioxide (CO%26sup2;) and the average global temperature. CO%26sup2; concentration rose 0.6% over the 2004 peak — the largest yearly increase ever recorded – and the average temperature reached 14.6 degrees centigrade (58.2 fahrenheit) – making 2005 the warmest year ever recorded on the earth`s surface.

The mountain ranges of the Tibetan plateau contain the largest concentration of glacier ice outside of the high latitudes, yet, until quite recently, large areas were relatively unknown to western scientists. In the last couple of years, a number of scientific reports written by Chinese glaciologists have provided inventories of the mountain glaciers of Tibet and assessed their response to recent climate change. These findings make uncomfortable reading.

The Tibetan plateau is bounded by enormous mountain ranges — to the south by the Himalayas, to the north by the Tian Shan and to the west by the Karakoram and Pamirs — and is the size of western Europe, forming the largest high-altitude land mass on earth. At an average height of around 4,000 meters above sea level, the plateau contains more than 45,000 individual glaciers covering about 90,000 square kilometers and extensive permafrost.

Recent work by Dong Guangrong at the Chinese Academy of Sciences has shown that recent climate change has had a severe impact on the mountain glaciers and permafrost of Tibet and threatens to affect water supplies to many of the rivers draining the plateau. His analysis of data from 680 Chinese weather stations shows that average temperatures in Tibet have risen 0.9%26deg; centigrade since the 1980s and this has precipitated an annual 7% reduction in glacier extent and the melting of permafrost. These findings provide further support to research published in 2005 by American scientists who observed significant recent warming in Tibet from ground-based surveys.

Isabel Hilton: You`re now a filmmaker, you live in China — tell me about your background.

John D. Liu: I went to China first in 1979. I was 27. I`m half Chinese and my father had been telling me since [then United States president Richard] Nixon`s visit in 1972 that I had to go to China to help China develop. I was born in Nashville, Tennessee, and was living in Bloomington, Indiana, in the US. I didn`t want to go to China. It was an interesting time: I was young and America was an interesting place.

I had been to Hong Kong, Taiwan, Singapore, but China didn`t seem very interesting. It had a communist government and when I looked across the border from Hong Kong when I was 13, I saw a man pointing a machine gun at me. China to me at that time meant [the philosopher] Lao Tzu and Taoism and Tang literature. Contemporary China didn`t resonate. Then, in the late 1970s, my father said, “You must go because your grandmother is going to die.” What could I say?

So I went to China and I realised he was right: it was much more interesting for me to film in China than in the US. So I did a semester of language training and I went to work for [the American television network] CBS as a producer-cameraman. I worked for them for 10 years.

IH: How did you get from there to the environment?

JL: I was so exhausted after the collapse of the Soviet Union that journalism had lost its appeal and I wanted to make films instead news reports, so I went to work for Italian state TV, where I made one-hour documentaries, then for German TV for three years. By then it was the mid-1990s and the environment had been deteriorating. China was changing from a fearful place, just out of the Cultural Revolution, to a market economy. There was a flowering of creativity and greater social freedom. Although 1989 punctuated it somewhat, even that was book-ended by decades of peace and prosperity.

During this amazing period of reform, opening and economic progress, there was so much pollution. Finally it struck me: I live in Beijing, my children were born here, and we were all suffering. It was clear to me that I had both the right and the responsibility to do something.

Most of the Chinese seemed detached, as though it wasn`t their responsibility. I think they thought the government was responsible and they had been conditioned to believe that they didn`t have either the right or the responsibility [to act]. Some people thought, “I`m just one person; there`s nothing I can do.” Others thought, “It`s nothing to do with me; it`s [the role of] somebody else.”

And in a way, that was my attitude. I used to think somebody ought to do something about the environment but what I meant was, “Somebody else ought to do something about the environment.” I was too important and busy. But after a while I realised that this was the same attitude that was part of the problem. So we began the Environmental Education Media Project, to take existing films on the environment to China and to translate them into Chinese.

We started working with the Television Trust for the Environment, and we brought over [Britain`s] Channel 4 and BBC`s excellent documentaries, on pest management and water wars. Finally we took hundreds of films. Then we wanted to make films and needed research, but there was no research facility.

So we said to SEPA [China`s State Environmental Protection Administration] that we wanted to build a reference and research facility. They have a huge US $70 million building built by Japanese foreign assistance, called the Japan-China Friendship Environmental Protection Centre, on the Fourth Ring Road in Beijing. They opened up the cupboard where cleaning ladies were storing their mops. We said this wouldn`t do. Finally they took us up to the seventh floor and opened a door marked “Library” – it turned out to be a huge room, 750 square meters — that had been empty for three years.

So we began to build a library. Now it`s the largest concentration of environmental information in China — the China Environment and Sustainable Development Reference and Research Centre. It`s on the web. [American environmentalist] Amory Lovins has spoken there – so many people have been through there now.

Then we started making films, researching water, wetlands, grasslands, migration and so on. Then we found HIV was a huge problem in China and there wasn`t much information about it. So we helped the Chinese Centre for Disease Control to create the China HIV/Aids Information Network (CHAIN).