Hello from Johannesburg, where we’ve just wrapped up the first Moral Money Summit Africa (now available to watch on catch-up).
In a day packed full of compelling debate, one troubling concern surfaced repeatedly. Several speakers warned that the global environmental, social and governance agenda is far too closely tailored to European and North American economies — and is not set up to meet the needs of developing nations in Africa and elsewhere.
Among those sounding this alarm was South African government minister Pravin Gordhan, as you can read below. First, check out Oliver Telling’s scoop on a lobbying campaign against new biodiversity regulations in the UK.
And don’t miss our new Moral Money film on the booming lithium supply chain, featuring key industry players in Chile, England and Norway.
— Simon Mundy
BIODIVERSITY
Exclusive: UK shipping ports warn of ‘catastrophic’ cost of biodiversity regulation
Efforts to cut pollution and halt the decline in biodiversity are both critical to the planet. But there is a growing debate over whether making progress on one of these goals can negatively impact the other.
Amid warnings that countries are neglecting the global decline in species while prioritising efforts to tackle climate change, some have pointed to the potentially detrimental effect that huge wind and solar farms are having on animal habitats.
And as some governments boost efforts to protect the world’s ecosystems, proposals for new biodiversity regulations are facing active resistance from industry bodies.
The latest touchpoint in the UK is around shipping ports. This month, the government plans to finalise requirements for developers to restore habitats when constructing sites in England.
In a letter seen by the Financial Times and reported for the first time here, the British Ports Association has urged environment secretary Steve Barclay to rethink the “catastrophic” potential cost of plans for the so-called biodiversity net gain regulations, which will require developers to ensure they deliver a net positive outcome for nature.
Up to 11 ports must be developed by 2040 to maximise the development of the UK’s floating offshore wind farms, according to a report by industry group RenewableUK. But the BPA, which represents major port owners such as DP World and Associated British Ports, said in its last-ditch appeal that the biodiversity regulations in their current form will “seriously harm investment in UK port development at a time when it needs to be encouraged”.
The letter, penned by BPA chief executive Richard Ballantyne, echoes resistance to similar plans in the EU, where some politicians have said proposals to restore marine habitats risk undermining efforts to build wind farms.
The UK’s planned regulations are centred on an algorithm that will be used to calculate the biodiversity value of land that is slated for development. Developers must help regenerate 110 per cent of that value by developing new habitats, purchasing habitats developed by other landowners, or buying biodiversity “credits” from the government.
The development of a new port with a jetty, pier and terminal could cost £227,520 in biodiversity credits, based on the FT’s assessment of a hypothetical analysis by Natural England and prices currently proposed by the government.
Although BPA said it “remains supportive of mandatory biodiversity net gain” in principle, it added the credit prices were “extremely high” and the proposed requirements could surpass the cost of actually developing a port.
Opposition to the credit prices has been countered, however.
The department for environment, food and rural affairs said that “buying statutory biodiversity credits is a last resort option for developers”, adding that its “impact assessments show that delivering biodiversity net gain typically represents a very small percentage of overall development costs”.
Sophus zu Ermgassen, an ecological economist at Oxford University whose team has studied the regulations, pointed out that the cost of the credits was set deliberately high to discourage developers from buying them instead of investing in actual habitats.
He said the regulations were “really ambitious” and “forward-thinking”, adding it was impossible to assess how much they will actually cost until they are enforced. Even once this happens, port owners will buy habitats from landowners on a private market.
“The price of rewiring our economy can sometimes be painful. It doesn’t mean it’s not necessary,” he argued.
Last year, diplomats agreed to protect almost a third of the planet’s lands and oceans by 2030. Experts warn countries are already falling behind on the earlier Paris Agreement to limit global warming to 1.5C above pre-industrial levels. If businesses and governments cannot work out how to reconcile these efforts soon, they risk missing both goals entirely. (Oliver Telling)
INVESTING IN AFRICA
Pravin Gordhan: A new paradigm needed for ESG in Africa
As a two-time finance minister now serving as minister for public enterprises, Pravin Gordhan has been at the centre of South Africa’s efforts to ride the economic waves of the global transition to cleaner energy.
There’s a risk, Gordhan told the FT’s Africa editor David Pilling yesterday, that the energy transition pathway being pursued by developed-country governments and investors will not properly serve the interests of developing nations in Africa and elsewhere.
In particular, Gordhan said in the interview at the Moral Money Summit Africa in Johannesburg, environmental, social and governance investing strategies need to take better account of the needs of African economies.
“Instead of trying to fit Africa into ESG, we need to ask the question: ‘What are Africa’s priorities in the modern day world?’” Gordhan said, citing human capital development, infrastructure and industrialisation in particular.
“If ESG is converted to an African paradigm which reflects African priorities and developing country priorities, it will certainly have a lot more relevance, it will provide the right kind of focus, and it will break through some of the barriers that we are all aware of,” he said.
Gordhan expressed frustration that too many global investors still viewed Africa as “a frightening place”, and required “de-risking” of investments by multilateral institutions before they would be willing to commit capital to the continent.
He was speaking ahead of a new round of discussions between South Africa and rich-world governments over a $8.5bn support package for an accelerated shift away from coal power, which provides the vast majority of South Africa’s electricity generation.
Gordhan said the partner countries had shifted the terms originally proposed for the landmark “Just Energy Transition Partnership” announced at the COP26 climate summit two years ago — a model that is also being pursued in Indonesia and Vietnam. While the initial discussions had focused on grants, the deal now looked set to involve these “on a very minimal scale”, together with concessional loans and guarantees. “So the mix has changed from what it appeared at COP26 to what we have now,” Gordhan said.
More broadly, Gordhan said, rich-world governments needed to do more to incentivise green energy investment in Africa, to support the continent in pursuing “the green path — as opposed to the polluting path that many developed countries have walked for over 100 years, for which developing countries are now expected to pay the price”. (Simon Mundy)
Smart read
At the imminent COP28 climate summit, nations must “reject the delusion” that carbon capture and storage will cancel out the climate impacts of large-scale fossil fuel usage, writes Adair Turner.
Read the full article here