We are delighted to welcome Jamie Plotnek who joins Hawthorn as a Director. Jamie is a sustainability, climate and ESG specialist, with more than 15 years of experience advising companies and charities on confronting environmental challenges. He joined Hawthorn from the international non-profit Climate Group, where he developed and led a global campaign on zero emission vehicles. Jamie’s previous roles included leading communications on climate and energy at Unilever and heading up business and public sector engagement for one of Britain’s biggest climate change campaigns.
Sarah Sands moderates a roundtable discussion with Greta Thunberg, Vanessa Nakate and UK newspaper editors and broadcasters ahead of COP26
The last time I was in a room full of newspaper editors it was to discuss press regulation, so naturally all ended in mutiny. On Friday, before Greta Thunberg and Vanessa Nakate headed off to protest against investment in fossil fuel projects, and then onto Glasgow, I introduced them to media decision makers in a private, round table discussion hosted by the Natural History Museum.
This time there was a wholly different spirit and purpose. Greta has remarkable convening power, but as moderator I had wondered whether the journalists would feel they were being lectured. They didn’t. Here was huge media influence coming together in one room, abandoning cynicism, ready to listen and to take responsibility for informing the public and holding government to account.
Greta was also ready to listen, facts at her fingertips but never hectoring. Her faith is in the people rather than the politicians and thus she turns to the media. This slight figure, remarkably composed, speaking perfect English, can hold a room of media leaders who reach millions. Alongside her was a figure of comparable charisma, the Ugandan activist Vanessa Nakate, talking of the moral responsibility towards the global south, which is responsible for a tiny percentage of the world’s carbon emissions, yet pays the highest price in loss and damage.
The media leaders talked, under Chatham House Rule, of their commitments and challenges. How to keep readers interested in a story both existential and urgent without overwhelming and alienating them? How to balance short-term gains – energy security – with medium term destruction?
The climate scientist Professor Simon Lewis, who joined Greta and Vanessa at the meeting, does not mince his words about the scale of the threat to “human civilisation”. Lewis claims in his book The Human Planet, that human kind is a geological force, changing everything, forever.
Greta and Vanessa wanted to meet the media decision makers because galvanising public opinion and keeping pressure on governments are crucial if we are going to get to net zero. The media are good at that. Indeed, Greta has said of the media: “You are our last hope.” There was honest self-examination during the session. One editor raised the rule of journalism that you cannot keep doing the same story and keep reader attention, but then observed that coverage of Covid had shattered that rule.
We discussed the lessons from the pandemic, during which media played an important role in informing the public and persuading them to get vaccinated.
There were further insights: television was thought to have an advantage over print in covering climate because of the power of images. Our senior journalists agreed that humanising and personalising the issue helped with engagement. They also emphasised that hope was important.
Audiences, particularly for financial media, like reading about technological solutions. Can journalists discriminate between aspiration and realistic achievement? Can even scientists be sure of what is going to work?
The editors talked about representing climate stories through entertainment or graphics or on the weather pages, in order to keep audiences engaged. It can be a tough sell: according to George Marshall’s book Don’t Even Think About It, our brains are tragically hard wired to avoid thinking about climate change.
Friday was a thought provoking session from a group of media leaders who have power and recognise responsibility. The final words came from Vanessa Nakate, who had found herself erased from media photographs when she spoke at the youth forum in Milan, an editing decision that seemed symbolic of the lack of attention paid to the global south in discussions about climate change. “Whose story are you telling?” she asked.
Then Greta headed off for her next protests, a small, self-contained figure, immediately mobbed by her supporters. An 18-year-old activist who has become a world figure.
Policy preview: referanda to the rescue?
Planning reform has long been seen as a bugbear for the Conservative Party. Even the current government, with its 80-seat majority, has faced calls to water-down its proposals in the aftermath of June’s Chesham & Amersham by-election attenuated concerns that housing reform could erode support from the traditional Conservative base, homeowners.
The Labour Party has attempted to seize on this, arguing that Prime Minister Boris Johnson’s tax increase puts the burden to fund social care on workers rather than on homeowners. Nonetheless, we noted in our 23 June Horizons newsletter that we expected Johnson to push ahead with the core of these reforms despite that shock result with the Liberal Democrats overturning a 16,000 majority.
Johnson and Housing Secretary Robert Jenrick, however, have faced grumbling from the backbenches, including from former prime minister Theresa May over the planning reforms. Yet some of these same backbenchers may have picked up on a solution that allows Johnson to avoid risking a major rebellion. MPs are expected to introduce a private members bill that would give local communities a vote on housing in their area, including approving density plans and style guides.
The policy, known as ‘Street Votes,’ is the brainchild of the Policy Exchange and Create Streets think tanks and aims to challenge the perception that new developments are aesthetically, and economically, unpleasing to suburban residents while also enabling those rural residents to protect green spaces even when their local authorities aim to increase the housing stock.
Whether such a policy could be successful remains to be seen. Advocates such as Sam Bowman of the US’ International Center for Law and Economics argue that it provides the optionality necessary to have a ‘bottom-up’ approach while allowing the political hurdles, at both a parliamentary and local level, to be overcome by residents keen on raising the value of their neighbourhood. They point to similar proposals in Seoul and Tel Aviv that saw new housing approvals jump by as much as 50%.
Incorporating the Street Votes proposals into the government’s own legislation may well bring it sufficient votes to avoid a substantial rebellion. It may also bring in some Labour votes for Johnson’s housing plans and planning reforms, a situation Johnson has thus far been keen to avoid least he be seen to be dependent on Labour votes to pass them.
The Smart Votes system remains untested, and it will seem unnatural to many UK political observers that referenda, even of the hyper-localised variety, could be the panacea to some of its mot lasting political disputes. Politically, however, it offers the Johnson government the potential to declare victory on passing its reforms while deflecting responsibility for any eventual housing -target shortfall.
“Maybe this referendum will be the beginning of a trend” Former UKIP and Brexit Party leader Nigel Farage
Power play: waiting for Whately
The UK government is staking a great deal of political capital on its recently announced reforms for adult social care. Prime Minister Boris Johnson has gripped the ‘third rail of British politics’ by trying to tackle the issue, but the government could be damaged if the controversial policy is a damp squib.
Helen Whately, Minister for Social Care, will be responsible for driving and delivering the reforms. Funded by a rise in national insurance contributions and dividend taxes raising £12bn annually, the government will initially attempt to clear the pandemic-induced NHS backlog.
After three years of increased funding for the NHS, the extra cash will supposedly be diverted from the NHS and re-allocated to the social care system. If, of course, reducing funds to the NHS doesn’t prove too politically challenging.
With a political bid to prevent care users needing to sell their homes or other financial assets to fund their social care, the government has proposed a (means-tested) cap on the lifetime costs of social care of £86,000 from October 2023.
However, it is not yet clear exactly how or why the reforms will make the social care system. The political difficulty that has surrounded the issue for decades has largely been a matter of funding, and it is this area that was covered in most detail by last week’s announcement
There is still more to come in the way of solutions for how the government plans to tackle some of the underlying problems that the social care sector faces. Identified in Department for Health & Social Care’s white paper this February, these issues include insufficient integration with the NHS, too much bureaucracy and a need for more accountability in the system.
The government’s new plan includes provisions for more training and support for care workers, but detail on how it will address these issues is thin on the ground, with another white paper setting out further detail promised in due course. Social care providers such as Four Seasons Health Care have already criticised the plan as being too little too late, calling on the government to make the necessary reforms to help support staff as soon as possible.
Though the reforms have not been universally popular, they have not torpedoed the Conservative’s polling in the manner that Theresa May’s social care proposals did in 2017. Once the impact of NIC increase starts to bite, pressure will be on for the government and for Whately to show that their reforms are having a real effect.
“We have a social care crisis right now, and it can’t wait to for people to draft [a promised white paper], and then delay any funding and any staffing changes for another two years.”Jeremy Richardson, Four Seasons Health Care CEO
Dollars and sense: actioning ESG
It is not too often that international bond markets have to think about NGO’s. That is not to say it is unprecedented for them to do so – 25 years ago the International Monetary Fund and World Bank launched the Highly Indebted Poor Countries (HIPC) initiative following sustained pressure from the Jubilee Debt campaign and associated activist groups. HIPC today remains a key structure of emerging market debt markets, enabling many more countries, including debuts well into the bottom rungs of the credit rating spectrum, to issue international debt.
The sale of so much debt by low-income countries and companies in poorly regulated markets has often raised concerns about how they should be treated for investors seeking to put climate change concerns and environmental, social and governance (ESG) principles at the heart of their investing strategy. The credit investment industry is being slowly transformed by ESG investing, with so-called ‘green bonds’ now often trading at a premium. This makes green debt in theory cheaper, and therefore a market structure to promote the very ESG principles they encompass.
However, concerns about ‘greenwashing’ remain. If the recent trend for ESG investing does translate to a sustained premium, this risks major losses for creditors holding debts that are later revealed not to be as rooted in ESG as initially premised.
Given that similar concerns about morality in investing and the potential for economic growth to be more equitable globally prompted the HIPC initiative – which enables countries below a certain income level to receive special assistance from the IMF and World Bank – it is not too surprising that once again the voices of NGO’s are being heard on ESG investing.
Already there is evidence that they may be having an impact. In March of this year, the Nature Conservancy announced it was launching a programme to work with coastal nations to protect their waters, ‘Blue Bonds for Ocean Conservation’. The effort attempts to combine the twin realities that it is difficult for maritime nations to resist exploiting their waters’ wealth with the reality that debt countenancing ESG principles is cheaper for issuers.
The Nature Conservancy said that it was inspired to launch the programme by work it had done with the Seychelles government to restructure $22 million in its debts in 2016, but it is now set to face its first major market test. The government of Belize has announced its intent to restructure its debt – following two defaults in recent years – in a deal backed by the Nature Conservancy and its key creditors. Under the Blue Bonds programme, Belize will repurchase $530 million in dollar bonds for just over US$290 million. Investors see a gain to the 60% discount the debts had been trading at, while Belize reduces its debt burden substantially. In exchange it agreed to fund a $23.4 marine preservation endowment and the new debt provided by Credit Suisse to finance the repurchase will be subject to Belize continuing to honour certain ESG commitments. The deal has until 19 November to be approved by 75% of bondholders.
Bringing together international institutions, NGOs and bond markets proved an effective way to fund emerging markets growth with the HIPC initiative. The Nature Conservancy programme may just have established a template for ensuring that ESG principles remain a sustained, not fleeting, feature of funding this growth.
“A debt is just the preservation of a promise” David Graeber, Author of Debt: The First 5,000 Years
Dollars and sense: internal activism
‘Green’ investment funds and public pressure are forcing big oil firms to change their behaviours, but immediate material change will be limited, while we await and expect further regulatory changes.
This year’s AGM season provide tumultuous for the world’s largest publicly-listed energy firms. Activist ‘green’ hedge funds have used their positions to compel major players to progress on their decarbonisation credentials. Such firms have always been vulnerable to criticisms from climate activists and environmental NGOs.
But the rising salience as climate change as a political issue, coupled with the trend toward a greater focus on companies’ social and environmental credentials, has lent credibility to climate activists operating in the financial world.
Hedge funds such as Engine No. 1 have led the charge by forcing board appointments and environmentally-conscious resolutions at some of the biggest oil firms, including Chevron and Exxon Mobil. These efforts are positioned as moves to maximise shareholder returns and to ensure that energy firms are well-equipped to weather global transitions to renewables. This is a trend we will doubtless see continue as climate change’s impacts are further felt across the world and activists emulate the like of Engine No. 1.
We are also seeing developments of the regulatory environment around listed firms’ environmental reporting requirements in both the UK and the US. For example, the next few years will see the progress along the FCA’s roadmap concerning firms’ obligations around climate and ESG reporting. The roadmap includes reporting requirements for listed entities aimed at preventing greenwashing. From this accounting year, it is already the case that large publicly-listed firms should report their approach to measuring and managing climate-related impacts and risks, and the FCA looks committed to expanding the set of firms affected.
Across the Atlantic, the SEC appears similarly committed to mandating that public companies report climate risks around their behaviours. Although it is already the case the case that oil and gas firms must report on their carbon emissions in the US, this regulatory shift is symptomatic of greater desire by regulators and governments to force companies to disclose the climate impact of their activity. As a sector long negatively associated with carbon emissions, we expect more stringent regulatory mandates to be placed on oil and gas firms in the coming years.
Major economies’ efforts to reach net zero carbon emissions are proving politically contentious across the world. Mandating more open climate reporting will help provide governments with greater political cover to make necessary policy changes. The tightening of ESG reporting requirements, however, can shift the onus for action to a fight between business and government to one within the boardroom.
Though oil majors have been exploring how they can convert their existing facilities to expand their renewable energy production capacity, ‘green’ policies by firms will only go so far. Increased regulation, both in the form of reporting requirements and of minimum climate standards necessary for listing, will likely be a permanent fixture. Governments and activists will both look to listing requirements to bring the battle to the boardroom.
“We welcome the new directors to the board and look forward to working with them—constructively and collectively on behalf of all shareholders.”
Exxon Mobil spokesperson, in response to election of Engine No. 1’s nominees Gregory Goff and Kaisa Hietala.
Power play: Afghanistan’s last bastion
The stunning fall of the Afghan government over the last week has sent shockwaves rippling across Western governments, with 20 years of military, human, and financial capital appearing to have been for nought in the fight for control of the country.
US President Joe Biden has made clear that he sees no more direct role for US forces in the country despite acknowledging the surprising speed and scale of the Afghan government’s defeat. And while UK Defence Secretary Ben Wallace too has bemoaned the state of affairs in the country, the reality is that there is no political will in Britain. However, one pocket of resistance to the Taliban remains – Afghanistan’s Panjshir Valley.
Panjshir’s most famous son, Ahmad Massoud, announced on 16 August that he planned to lead a new anti-Taliban movement from the region, the sole territory that has not fallen to Taliban control over the last week. The Panjshir has welcomed fleeing minorities from other parts of the country, special forces units abandoned by their military leaders, and vice president Amrullah Salleh, one of the only senior leaders from the Western-backed government not to flee the country. Protected by significant peaks and a loyal population, it is not the first time that resistance to the Taliban has been left to the Panjshir Valley.
The region famously never fell to the Taliban in the pre-US invasion civil war. It became the core of the ‘Northern Alliance’ against the Taliban that was led by Ahmad Massoud’s father, Ahmad Shah Massoud, better known as ‘the Lion of Panjshir’.
Ahmad Shah Massoud was assassinated two days before the 9/11 attacks, by al-Qaeda operatives posing as Western journalists. The killing was ordered by Osama bin Laden as assistance for his Taliban hosts and to shore up the al-Qaeda-Taliban alliance before the terrorist attacks that did so much to change Afghan and world history. That his son is now left to fight the Taliban without direct Western assistance – effectively the same situation which Ahmad Shah Massoud found himself in, having pleaded for support at the European Parliament just months before his assassination – demonstrates how little impact Western intervention has had on Afghanistan’s underlying divisions.
The younger Massoud notably finds himself without the same broad alliance among Tajiks and Uzbeks that his father was able to rely on. Even before the government’s collapse, the Taliban made inroads in northern Afghanistan far beyond what it ever achieved before the US-led invasion. Meanwhile the Taliban has made clear it seeks international recognition, and even made noise about adjusting its medieval practices ever so slightly to such support. However, it ultimately remains the reprehensible terror group that it has always been.
If there is to be any international support for an anti-Taliban effort now or in the future, Ahmad Massoud and the Panjshir Valley may prove the sole conduit for hope that Afghanistan can avoid another decade of darkness under Taliban rule.
“This situation over the short and long-run, even in case of total control by the Taliban, will not be to anyone’s interest. It will not result in stability, peace and prosperity in the region. The people of Afghanistan will not accept such a repressive regime. Regional countries will never feel secure and safe.”Ahmad Shah Massoud, ‘Letter to the American People’ (1998)
Policy review: hydrogen hopes
The UK government launched its first its plans for a ‘world-leading hydrogen economy’ on 17 August, declaring its intent to secure more than 9,000 jobs in the sector and unlock £4 billion in investment by 2030. Hydrogen has long been linked with the green agenda, as the gas produces no carbon emissions when burned.
However, hydrogen comes in various varieties – and the debate over how to support the sector’s development largely breaks down into two camps over these: advocates of ‘green hydrogen’ derived from electrolysis and ‘blue hydrogen’ derived from natural gas but in which the carbon dioxide in this process is captured and securely stored or disposed.
The government’s hydrogen plan declares its preparation to offer subsidies in support of hydrogen production but crucially demurs on whether it will subsidise green or blue hydrogen, or both, only “committing to providing further detail in 2022 on the government’s production strategy”. A public consultation on “a preferred hydrogen business model” is now underway.
Advocates of both forms of hydrogen production will be lobbying the government in line with their preference, with ‘blue’ advocates keen to demonstrate its lower cost and ‘green’ supporters advocating for its potential as a carbon-free energy source, with no long term storage costs even if presently it is significantly more expensive.
The cost difference to the UK could be significant, as the government’s strategy lays out that it plans to offer effective ‘feed in tariffs’ in which hydrogen producers receive a payment to bridge the difference between the cost of production and the price at which they sell it on the market. It does caveat that this market price cannot be lower than the price of natural gas, but the price differential between gas and ‘green’ hydrogen is significantly wider at present than between gas and ‘blue’ hydrogen.
Blue hydrogen’s advocates, however, have an additional tool at their disposal in addition to the cost basis, which will be subject to advancing economies of scale in electrolysis technology (though some have already voiced concerns about reliance on Chinese technology in this space). Namely that blue hydrogen offers a route to extending the lifeline of the North Sea’s hydrocarbons industry – something already endorsed by the UK’s oil and gas industry.
With the public purse under post-pandemic pressure and the Conservative’s levelling up agenda, subsidies for blue hydrogen may well prove a potential panacea for a number of areas of concern, but selling their potential will require a sustained and joined up effort from both legacy industry and new hydrogen players.
“I believe that water will one day be employed as fuel, that hydrogen and oxygen will constitute, used singly or together, will furnish an inexhaustible source of heat and light” Jules Verne
Sarah Sands spoke to The Rt Hon Caroline Flint about managing change in business and politics.
Given her former position as Shadow Secretary of State for Energy and Climate Change and her current role as co-Chair of the “Getting to Zero” project for the “Onward” think tank, Caroline spoke about how businesses formulate and deliver their ESG strategies.
Listen to the replay of Sarah Sands in conversation with the Rt Hon Caroline Flint.
The Rt Hon Caroline Flint, during twenty-two years as the Labour MP for Don Valley, Caroline Flint served six as a Government Minister and five years in the opposition Shadow Cabinet before joining the Commons Public Accounts Committee and the Intelligence & Security Committee. A familiar voice on news and current affairs programmes, Caroline has made numerous appearances on Question Time and Radio 4 Any Questions and is a regular political and policy commentator. She chairs the Advisory Board of the Institute for Prosperity, is an Advisory Board member for public service think tank Reform and an Associate for Global Partners Governance. Caroline co-chairs the ‘Getting to Zero’ project for the Onward think tank.
Sarah Sands is a Board Advisor at Hawthorn. Prior to this she was editor of the Today programme, Radio 4’s flagship news and current affairs programme. She was previously editor of the London Evening Standard, the first woman to edit The Sunday Telegraph and deputy editor of The Daily Telegraph. Sarah is an honorary fellow of Goldsmiths College, University of London, Lucy Cavendish College Cambridge and a visiting fellow to the Reuters Institute. She is chairwoman of the political think tank Bright Blue, a patron of National Citizen Service and was chair of the Women’s Prize for Fiction.