Three climate actions you can take today.

One of the challenges we all face in addressing climate emergency is “what can I do that would actually make a difference?”

As individuals, we often feel powerless to make a difference (we need to heat our homes, eat, travel, etc. and it’s tough to really reduce our consumption). Surely it’s up to the finance community to direct money to net zero? Yes, but we are not powerless. On my journey over the years, I’ve spoken to many hundreds of people from the most junior to the most senior to politicians.

My one takeaway is that everyone needs ‘permission’ from someone else (their boss, their board, their shareholders, the members of their, their voters). On one level this ‘outsources’ the responsibility to someone else, but it also points to where the influence lies and leads me to think that the biggest financial impact we can all have as individuals is to do the following three things.

Ask your bank, insurer & pension provider

1. What are their net-zero commitments? (and what do they mean)
2. How will they demonstrate them? (progress and success)
3. How is CEO pay tied to net-zero success? (and what happens if they fail)

Updates

This seems to be emerging

https://www.linkedin.com/news/story/norway-fund-gets-tough-on-net-zero-6107074/

https://twitter.com/nesta_uk/status/1600466016915505155

Net Zero Data

Data related to delivering Net Zero impact on our ecosystem.

Our transition to net-zero is underway — how can we ensure it is provable, robust, secure and fair?

via The FT we have

The world’s largest oil traders are rushing to plough billions of dollars into renewable energy projects in the next five years, as they speed up preparations for a dramatic shift in the world’s energy mix. Marco Dunand, chief executive of Swiss commodity trader Mercuria, said the company was investing $1.5bn into projects in North America with private equity partners, while Torbjorn Tornqvist, chief executive of Gunvor, said he planned to commit 10 per cent of the company’s equity — hundreds of millions of dollars — over the next two years. “If you want to exist in 10 years’ time and don’t want to be in renewables then I think it is going to be tough,” Mr Dunand told the FT Commodities Global Summit. “We don’t have a choice” but meet the Paris climate goals, he said, calling it the world’s “biggest challenge”

via Forbes we have

renewables investments in Germany and France yielded returns of 178.2% over a five year period, compared with -20.7% for fossil fuel investments

Now join up with the global (excluding USA, but now including China) consensus on the Paris Accord, and the new financial reporting mechanisms (e.g TCFD) for Central Banks in Europe, and beyond.

And, with Icebreaker One, we are developing a national programme — Open Energy — which along with enabling data sharing, has an explicit, embedded target to help deliver the UK’s legally binding mission to be net-zero.

Open Energy is based on the principles of Open Banking, which is still only just getting started… this piece highlights that

the global open banking market generated $7.29 billion in 2018, and is expected to reach $43.15 billion by 2026, growing at a CAGR of 24.4% from 2019 to 2026.

We hope to unlock similar value and growth by opening up access to energy data across not only the sector itself but by connecting energy data across the rest of the systems that must be decarbonised, including transport, the built environment, water and agriculture.

The time for theory is over. The question is how we will instrument the transition to ensure net-zero is provable, robust, secure and fair.

In City AM

[Re: Why Open Banking is the next finance revolution]

As co-chair of the original Open Banking Standard, it’s great to see the progress being made — and we fully expect this to extend into Open Finance (spanning insurance, pensions and investments). However, access to data in consumer finance is just the tip of the (fast-melting) iceberg. To respond to the impact of climate change we need to apply lessons learned to business data — to make data-at-scale work harder to deliver innovative financing for a carbon-zero future. With COP26 being held in the UK this year, we have an opportunity to combine our industrial strategy, climate targets and data infrastructure to shape our investment strategies, reveal efficiencies and better understand risk. Sorting out our ‘data plumbing’ will help power world-class analytical capabilities (e.g. artificial intelligence) to help our financial and environmental worlds align.  

Gavin Starks,

Founder, Icebreaker One

Open Banking—is a regulated standard that addresses data sharing across the banking sector. 

It addresses: 

• Rights
• Liability models
• Dispute resolution and redress
• Consent
• Security
• Legal frameworks
• Usability 
• Logistics
• Technology architecture
• Operating principles
• Myriad related issues

Open Banking was created by convening teams to develop common principles and practice for sector-wide data sharing. They included existing and challenger banks, trade bodies, fintechs, Treasury and regulators. In the UK, this led to the creation of an independent non-profit (funded by the banks) to develop and take the standard to market, with a directory of accredited organisations using it. 

The standard was (and is) developed openly—as a result, it has helped to catalyse initiatives around the world.  Similar initiatives now exist across Australia, Bahrain, Europe, Hong Kong, India, Japan, Mexico, Malaysia, New Zealand, Rwanda, Singapore and the USA.

This work is being extended to ‘Open Finance’. This would further include Investments, Pensions, Savings, Consumer Credit, Mortgages and General Insurance. 

We are also working on its extension into other sectors such as energy and environment (through IcebreakerOne.org). 

We are working with the UK regulator, the Financial Conduct Authority, to help shape the direction of this work.

Development of the Open Environmental Risk Standard continues: this week, we’ve been working on a one-pager to translate what we’re doing in to more simple words. This is a summary of what we’ve come up with so far. If you would like to comment it’s also available as an open Google Doc (shortlink: http://bit.ly/dgen-ib1-001).

Our challenges

Our societies face risks due to extreme weather and events in a changing climate in the $trillions. Combined with rapid industrialisation of new economies and population growth, the impacts are multi-faceted: they will affect lives, infrastructure and assets.

Our capacity to model these increasingly complex, non-linear risks is not keeping pace with the frequency and severity of extreme weather events, and the uncertainties and the pace of our global development. We are also missing opportunities to innovate and create new solutions using the tools we have created over the last 30 years.

Our opportunities

For infrastructure owners, the opportunity is to better prepare for disasters and to have greater transparency of the systemic, nonlinear risks being faced.

For institutional investors, the opportunity is to actively manage risk exposure and to transform potential losses into sustainable returns.

For insurers, the opportunity is to provide new class of insurance combined with market standard risk transparency and openness and to create new investment opportunities.

For policy-makers, the opportunity is to ensure that infrastructure investment contributes to reduced physical risk, to help increase marketplace resilience, and to enable new products and services to emerge.

For National Disaster Management Offices (NDMO), the opportunity is to accurately model and understand the risks faced and to better prepare for, or prevent, the loss of lives, livelihoods and disruption to homes and businesses.

The way forward

We all need a better way of making our money work to keep things safe instead of paying for things once they have broken.

We must act together to protect our citizens, our property, our markets and our businesses.
Our challenge is to ask how might we combine the wealth of nations, machines and humans to unlock the $trillions required to create a resilient, low carbon economy.

In this, the 30th anniversary of the Web, we are in an unprecedented era. We have instrumented the world, connected billions of people, millions of companies and hundreds of countries with the web of data. Learning from open standards, such as the Open Banking Standard, we have the opportunity to create new categories of data portability to underpin open marketplaces.

Our programme, codename Icebreaker One, will combine expertise in policy and business innovation to harness the new tools and infrastructure now available to us, at scale.

Our focus

Icebreaker One will target infrastructure due to its vested interests in resilience, substantial exposure to climate risk, and need to unlock new funding mechanisms. This will enable better decisions to be made and provide better decision-support on the uncertainties faced today.

Based on user needs, we will be defining specific use-cases and actors, ecosystem boundaries and the core data infrastructure within scope. We will ask how the web of data could improve risk modelling for an insurer, what legal, commercial policy and technical frameworks could transform the market: from how to better price resilience to defining new financial instruments to enable pre-investment. The aim is not to produce a situation where we are just insuring the risks.

Based on the transformative power of the web of data (ranging from global geospatial data to self-reporting assets) we will explore and define how data rights, licensing, liability, privacy and security can be addressed to unlock new models, products and services. We will also consider the adverse effects of data.

Our process

Six working groups, working with a core governance group, will feed into the development of joined up frameworks for culture, policy, making, learning, standards and data infrastructure.

The culture group will create compelling narratives for peers, professionals and policy-makers.

The policy group frame the regulatory and legal environment which could support the work, including potential licensing models.

The making group will identify user stories that connect specific problems, stakeholders and data, and identify innovations that could be enabled the standard.

The learning group will explore business models through use cases and direct research.

The standards group will addressing both human and machine standards and how they might interoperate to support collective intelligence.

The data infrastructure group will determine the scope of foundational data to be included and why, taking a view on architecture, interoperability, security, discoverability and usability.

We will publish our draft report in May 2019.

For more details see http://dgen.net/oers

I recently re-watched The Big Short.

… and have, in many conversations, been testing out the idea that we are approaching a potential ‘market collapse’ around financial risk, particularly around environmental risk insurance. People have been nodding.

The idea being that major assets, infrastructure, cities, countries are becoming ‘uninsurable’.

The models are either ‘not good enough’ and therefore the premiums ‘too high’, or the models are ‘good enough’ and therefore the premiums ‘too high’ or uninsurable.

This makes me wonder if we need to invert the model: pre-insurance to invest in resilience rather than pay-when-broken.

So, how might we make that market work?

How would we lay the foundations for an investment at the scale of the Apollo Program + Manhattan Project + Marshall Plan?

How would we combine the intelligence of humans and machines (a current buzzphrase is ‘collective intelligence’), at-scale, to include everyone in the solution?

If we are going to enable hundreds of millions of people to enter the economy (e.g. digital-first, mobile financial services anchored around things like Open Banking), how can we ensure that those new economies are zero-carbon?

Might OERS be a starting point?

UPDATE 2019-02: briefing note here

Working with Europe’s leading climate innovation fund, Climate KIC, we are initiating the creation of an Open Environmental Risk Standard for the insurance sector to:

1. develop an open standard for sharing environmental risk modelling information;
   
2. create sufficient momentum to reach an ‘escape velocity’ that drives engagement and adoption;
   
3. to enable a step-change in economic, social and environmental outcomes that unlocks the multi-trillion dollar market opportunity in the use and application of risk information.

If you are interested in getting involved, please email gavin@dgen.net

Climate KIC is the largest climate change focussed incubator in the world, with a network across 13 European countries

[a 3 minute read]

Guest post: Constellator, Gea Mikic, Researcher, Dgen

Algae is undergoing extensive testing in labs in China, Russia, Spain and Sweden to see whether its ability to absorb carbon from the atmosphere can be used in carbon sequestration technologies. Of all of the (many) uses for algae, this is hands-down the most fascinating. From carbon sequestration to biodegradable clothes, water bottles, edible cutlery and biofuels, algae seems to be an all-round winner.

The premise is as follows: algae is a naturally occurring plant form which grows in forests in the oceans, is essential to ecosystems, easy to cultivate and, most importantly, acts as a carbon sink. As in, it absorbs carbon dioxide from the atmosphere and uses it for photosynthesis. In the optimum conditions, carbon-dioxide capture efficiencies as high as 80% to 99% are achievable, with a gas residence time of 2 seconds. Given its prowess as a carbon sink and relative cheapness to produce, it’s hardly surprising that algae has found application in a multitude of new technologies banding together to work against climate change.

This is exactly why a concrete plant in Sweden has created Algoland. In Algoland, microalgae grow in bags in the sunlight, nearby seawater is piped in, and gases which would otherwise be released into the atmosphere are pumped in and allowed to absorb. With the high absorption rate, a few rounds through the tubes means that almost all the harmful by-products are instead used as plant feed. The result? Fortified algae which the factory dries and uses to supplement livestock feed, and an almost carbon-neutral concrete plant.

Will microalgae give us the answer to our carbon-sequestration needs?

News such as this is encouraging at a time when the IPCC has just published its more recent Special Report, ‘Global Warming of 1.5°C’, telling us that we’re currently on track for a 3°C increase in temperature. The IPCC warns, in no uncertain terms, that we have 12 years to do something about climate change before we do irreparable damage. The same report hypothesised that all future climate scenarios which do not result an increase of temperatures over 1.5°C require both carbon capture and removal of carbon dioxide which has already been emitted from the atmosphere.

This, again, is why the possibility of using microalgae for carbon sequestration is such an exciting

prospect. Currently, we’re still far from achieving the necessary goal of capturing and storing around 10% of global emissions to begin making a dent. At this particular point in time, there are 17 large-scale projects worldwide, removing around 40 million metric tonnes from the atmosphere annually, or 0.1% of the world’s annual emissions.

A key barrier is the expense and ongoing uncertainty associated with what is still a relatively new technology. However, algae could solve these problems. Algae can be cultivated on marginal land, grows in saltwater (so increased salinisation isn’t an issue) and requires less space than traditional crops. Estimates show that, for a 200-megawatt-hour natural-gas fired power plant, an algal pond of 3600 acres would be sufficient to capture 80% of the plant’s CO2 emissions during daylight hours.

Ultimately, the many applications of algae could be a crucial piece in unraveling the mess we’ve managed to get ourselves into.

Friends in the area tell me that this is the site that everyone is using to monitor air quality in the CA wildfire region.

A good example of why agencies should supply raw data and openAPIs — to help others develop apps and services that could better provide direct support to people.

Given the US  spends $billions on weather reporting, it’s surprising that this is the ‘state of the art’ for air quality … wonder if we’ll see a raft of investment in this area now?