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Why ADMCF’s Environmental Focus

Lisa Genasci —  March 18, 2017 — 2 Comments

As we enter ADM Capital Foundation’s second decade, we have launched a new website at ADMCF.org that reflects our narrowed focus on Asia’s environmental challenges.

Over the past ten years, we have worked with dozens of NGO partners to help support some of the region’s most marginalised children to better lives, we have pushed for action to reduce air pollution, to cut consumption of shark fin and protect our oceans, stem the wildlife trade, protect forests, build knowledge and action around China’s water crisis. We have worked to see that the appropriate research informs the right sort of change.

But this year represents a shift from our dual focus on children at risk and the environment to where we feel the need is greatest: environmental protection.

The two-decade shift of manufacturing to Asia amid lax local regulation and enforcement has come at unprecedented environmental cost. While we enjoy cheap goods, clothes in particular produced at unsustainably low prices, Asia shoulders the environmental burden of our excessive consumption. Global climate change, ocean acidification, the consequences of our excessive lifestyles, now affect us all.

Globally, we are living as though we have three planets in terms of resource consumption. We must find ways to live more sustainably, to accommodate a world population that is expected to reach 9 billion by 2050.

Philanthropy is not the only answer but it can support essential research, spread knowledge, seed ideas, push for thought change in consumers and action from governments, all of which is critical.

Yet only an estimated 2 to 3 percent of global philanthropy finds its way into addressing our urgent environmental challenges.

Thus, we felt ADMCF’s resources were best spent striving toward: cleaner air; improved and secure water sources; forest protection balanced with low carbon rural development; better managed fisheries and sustainable consumption of our ocean resources; improved regulation and enforcement to protect endangered wildlife.

At the same time, we are exploring sustainable business models, a circular economy and the finance that must underpin all.

Collaboration remains the key. None of our work can be done alone, without the energy of our many incredible NGO partners, our funding partners, our pro bono supporters.

The challenges we face are substantial but in our short ten years we can see systemic change, we can see that it is possible to generate lasting impact.

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In air pollution, asia, china water, Environment, Fish, Food, forests, frogs, Hong Kong, indonesia conservation, Marine, Philanthropy, pollution, shark finning, sharks, water
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China Cracks the Door Open To Environmental Reform

Lisa Genasci —  March 25, 2013 — 3 Comments

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At a recent environmental forum in Beijing, the speakers were in full swing with relatively predictable insight into China’s environmental challenges, and more broadly, environmental challenges elsewhere.

Then came the question-and-answer period and again a couple of relatively innocuous questions before a Chinese man strode to the front of the auditorium and launched into a discussion of his own.

In angry tones and raised voice, he said the Chinese government was not doing enough to mitigate air, water and soil pollution and demanded immediate attention to related public health concerns.

No one flinched, people listened intently, respectfully, no one emerged from the shadows to haul him away. Several students in the audience also asked about lack of action on pollution and suggested that more should be done to clean the environment and protect citizen health.

I sat beside a Chinese friend who simply shrugged, saying she had seen the man speak out at two other recent environmental forums. She said that because of his stature as an energy expert, he was left unhindered to express his opinions publicly.

She pointed out that the students were also feeling free to criticize the government, whereas previously the unspoken line everyone knew not to cross was any sense of direct opposition to Beijing authorities.

My sense from the entire trip (my previous visit being only four months earlier) was that China is changing, and perhaps faster than we could have imagined.

For the first time, censors this year have allowed Chinese media to carry reports about the “cancer villages” in areas of high industrial pollution.

Environmental advocate Ma Jun told me with some amazement that he had felt free recently to criticize a recent Ministry of Environmental Protection decision not to release data about soil pollution, which it considered a “state secret”.

Ma Jun said this was irresponsible and put public health at risk, a comment that was unusually picked up by the People’s Daily and Xinhua, among other news sources that aren’t usually inclined to publish remarks critical of the government.

“Previously, these comments would have been removed by censors,” Ma Jun said. “Now these issues are allowed to be talked about, debated and discussed.”

This became particularly clear, as March brought the annual meetings of the legislative and consultative bodies of China where major policies traditionally are decided and key government officials appointed.

Concern for the environment was a constant throughout the session – and was the subject of one in ten of the 5,000 proposals submitted by delegates.

Social media was also alive with commentary on the environment throughout.

And talk about environmental protection wasn’t simply a side act to the main show. The National People’s Congress (NPC) at 2,987 members is the largest parliament in the world and gathers alongside the People’s Political Consultative Conference (CPPCC) whose members represent various groups of society. This year, the NPC confirmed the new leadership of President Xi Jinping and Premier Li Keqiang.

This once-in-a-decade leadership change emerged from November’s Communist Party congress with a strong reform mandate and promising a more sustainable China, balanced growth as well as more emphasis on environmental protection.

To be fair, this was not, however entirely a departure in direction from the previous Hu Jintao, Wen Jibao administration and it remains to be seen whether the result will be real change.

The 2011, 12th Five-Year Plan, which sets the direction for policy, of course emphasized balanced growth and set priority green industries. The mantra that emerged then was that economic growth should not come at the expense of resource depletion or pollution.

Wen Jibao, representing the departing Old Guard, opened the 12th National People’s Congress with a “Report of the Work of the Government” pointing to “steady progress in conserving energy, reducing emissions, and protecting the environment.”

But levels of anger are rising, fueled by recent truly off-the-charts air pollution in Beijing as well as the repeated and increasingly public (because of the rapid spread of news on social media platforms) water pollution incidents nationwide. Rampant corruption among local officials that has allowed harmful practices to continue unhindered has also been a target of microbloggers.

This sense of disregard for public health coupled with an increasingly affluent and vocal middle class presents a problem for the Chinese government in terms of its own legitimacy.

Recognizing this, Xi Jinping said at the March proceedings that the government should play a stronger role in pushing reform and opening up.

“The new administration wants a new start,” Ma Jun said. “They want to make clear that the current environmental challenges are not their fault.”

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In air pollution, asia, China, china water, Environment, Philanthropy, pollution , , , , , , ,
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Sustainable Apparel’s Critical Blind Spot

Lisa Genasci —  October 10, 2012 — Leave a comment

Many brands that say they are producing sustainable product are in reality greenwashing their textile production in China, according to the latest report from five environmental NGOs in China.

“Sustainable Apparel’s Critical Blind Spot,” which can be found here,  was a follow on from a report I wrote about here released in April that named 49 global fashion brands using polluting factories in China and suggested consumers make a “green choice” when buying clothes.

Led by Ma Jun’s  Institute for Environmental and Public Affairs, “Cleaning up the Fashion Industry”  listed 6,000 water pollution violations by manufacturers of goods ranging from sports apparel to luxury handbags.

Subsequently, 30 brands began conversations with IPE about how to improve the environmental performance of their supply chain, according to Ma Jun.

Clothing brands and retailers such as H&M, Nike, Esquel, Levi’s Adidas, Walmart, Burberry and Gap have all established regular screening mechanisms, are actively identifying pollution violations in their supply chain and have pushed more than 200 textile and leather suppliers to clean up.

Adidas, Nike, Levi’s and H&M have begun to address environmental challenges with their dyeing and finishing suppliers, the report said.

The latest investigation looked deeper into supply chains following a letter sent September 25th by the NGOs to the 49 brands requesting information about pollution management issues at materials suppliers.

Besides IPE, authors of the report were, Friends of Nature, Green Beagle, Envirofriends and Nanjing Greenstone

In all, 22 of the brands receiving the letter, including Marks & Spencer, Disney, J.C. Penney, Polo Ralph Lauren and Tommy Hilfiger gave limited or no responses to specific questions relative to emissions violation problems in their supply chain. This despite Marks & Spencer, for example, promoting its “Plan A”, which is a sustainable business benchmark for global textile companies and retailers.

Companies promoting sustainability should “not continue to let suppliers pollute the environment and hurt communities whilst using concepts such as ‘zero waste’ and ‘carbon neutral’ to greenwash their performance,” the environmental NGOs wrote in the report.

The report draws attention to the fact that textile exports from China have dropped recently, weighed by higher labor costs in China, trade barriers, the appreciation of the RMB and higher resource costs.

Big brands have moved some of their cut and sew production to South and Southeast Asia.  Nike shut down its only shoe factory in China and recently, Adidas also closed its only factory in China, leading people to believe China is steadily losing its status as the textile factory to the world.

But materials production is still concentrated in China, with exports of these products rising steadily, according to the report. This is the most polluting portion of the apparel supply chain.

In the raw materials processing sector, which includes dyeing and finishing, exports are growing steadily. According to the 2011/2012 China Textile Industry Report, for the six main printing and dyeing product categories, the total amount of exported printed and dyed cloth was 14.412 billion meters which showed a year on year growth of 13.76%.

The value of exported printed and dyed products was US$16.979 billion, which showed a year on year growth of 31.26%. However, at the same time the total value of all exported textile products only increased by 0.49%.

The cut and sew industry provides the most jobs, uses less water and energy and pollution discharge is not a big problem. However, the reverse is true for textile production. Essentially, China has kept the dirty part of the business, while allowing the relatively clean, job-creating cut and sew industry to wane.

The problem is that enforcement of pollution remains weak in China, while the cost of inputs like water and energy are still relatively low. So dyeing and finishing companies often avoid any water or energy savings initiatives and disregard pollution control, ignoring environmental laws and regulations.

Sustainable apparel in particular,  has a ”dangerous blind spot,” according to the report, which means that dyeing and finishing mills and factories lower their environmental standards to cut costs and win orders in a race to the bottom.

Essentially the problem is that most apparel and retail brands still choose not to look into the polluting part of their business – the bottom of the supply chain. Consequently, materials manufacturers are still trying to produce in the cheapest way possible in order to keep costs low for fast fashion.

We as consumers must recognize that we have a choice not to buy the cheapest item on the shelves, to acquire less and from companies that truly care about not doing harm to our planet.

In air pollution, carbon, China, china water, Environment, pollution, Uncategorized, water , , , , , , ,
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Hong Kong’s Water Supply Far From Secure

Lisa Genasci —  May 13, 2012 — 4 Comments

I am constantly surprised that Hong Kong does not pay more attention to its water supply, that something so vital to our city is far from secured by our government.

How many of us know that 75 percent of our water comes from the Dongjiang River, while only 25 percent of the city’s drinking water is supplied by reservoirs from within the territory? That while Singapore has similar water concerns, the island nation is investing in technology to conserve, recycle and desalinate water to ensure adequate supply, yet our government simply is not.

This is wrong for many reasons but here are two of the most obvious:

1) China is experiencing a significant water crisis and is acting aggressively to ensure its own supply. As Civic Exchange’s Su Liu recently pointed out while speaking on a panel, “We in Hong Kong don’t see the big picture – 40 million compared to our 7 million also rely on the Dongjiang. If water tensions rise on the mainland – where is the priority? ” You can more read about the excellent discussion on China’s water stresses moderated by http://www.ChinaWaterRisk.org’s Debra Tan, here.

2) The Lower Dongjiang River Basin is becoming intensely  industrialized and urbanized meaning industrial pollution regionally is a real concern. At the same time, agriculture further inland has intensified and pollutants from farms, such as pesticides and fertilizers are just as dangerous in drinking water as industrial materials. So How safe is our water in reality? Clearly local testing shows that currently the water we drink meets health standards but can we be sure that will always be the case?

To my first point, China registers a 50-billion-cubic meter water shortage annually, with two-thirds of cities having trouble accessing water, according to a China Daily article last week quoting Chen Lei, the country’s minister of water resources. In all, China’s water consumption apparently has exceeded 600 billion cubic meters, accounting for 74 percent of the country’s exploitable water resources.

In January, the central government issued a document asking the entire country to limit the scale of water exploitation, improve the efficiency of water usage and curb water pollution. According to the article, China aims to reduce water consumption per 10,000 yuan ($1,597) industrial value-added output to less than 40 cubic meters by 2030, raise the effective water use coefficient of farmland irrigation water to above 0.6 and improve water quality.

Chen also has said the nation will set water consumption quotas for local governments and continue to perfect the water price formation mechanism in order to promote water resource conservation and protection.

So it sounds as though Su Liu has the right idea – the Chinese government priority won’t be to keep prices low and supply constant for the 7 million Hong Kongers drawing ever higher upstream on the Dongjiang.

And we are vulnerable. Our water agreement with Guangdong was renewed in late 2011 but only for another three years, until 2014 and for a maximum supply of 820 million cubed meters from the Dongjiang, a major tributary to the Pearl River, 83 kilometers north of Hong Kong. Our current accord commits to this supply regardless of drought.  But the river also supplies fresh water to seven other cities, including Guangzhou, Dongguan and Shenzhen. All of those cities, however, have seen allowances decreased during drought years so will Hong Kong continue to receive privileged treatment?

At the same time, we would be ill-equipped for any water rationing. As China Water risk has pointed out here, Hong Kong uses more water per capita than Paris, London, Singapore or Melbourne and over 50 percent of our water is for domestic use. This compares to just 15 percent of water usage in China being for municipal use.

Part of the problem is that our tariffs are among the lowest in the world. As CWR points out, the first 12 cubic meters of water used every four months is free for all domestic users. Countries with comparable GDP per capita such as Netherlands, Switzerland and the U.S. all have higher water tariffs.

But tariffs are also low in China and the expectation is that with a push on the mainland toward water conservation, pricing will likely at some point rise to a water tariff level of 2-3 percent of average household income. That should also translate to higher prices in Hong Kong.

Turning to pollution, I have written several blogs on the lack of enforcement of water quality standards in China. The intense industrial development throughout China, but particularly in the south, has helped fuel annual GDP growth in the double digits but it has also rendered many rivers, lakes and reservoirs, indeed much of the country’s groundwater, essentially useless for agriculture or consumption.

Of the country’s 26 key lakes and reservoirs monitored, only 23 percent fall within grade 1-111, while 19 percent of China’s seven major river basins monitored are  considered essentially useless. Finally, almost 74 percent of groundwater is considered grade IV-V standard, or excessively polluted. More information on China’s water pollution can be found here.

We should remember that a river collects the water in its basin and that means that all the pollutants within the Dongjiang Basin could potentially end up in Hong Kong’s water supply – not a pleasant thought. Will we have to wait for a major accident on the Dongjiang or its feeders before the Hong Kong government wakes up to our vulnerability?

For now, Hong Kong water quality data, although only through September last year, can be found here, on the Water Supplies Department website.

Hong Kong consumers have the ability to sustain a significant tariff hike.  That would help us move toward greater water conservation and at the same time provide  the resources for the city to invest in making options such as desalination and water recycling economically viable. What are we waiting for?

In China, china water, Environment, health, Hong Kong, pollution, water , , , , ,
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Environmentalists Name and Shame Global Fashion Brands

Lisa Genasci —  April 13, 2012 — 1 Comment

Five Chinese environmental groups have named 48 global fashion brands using polluting factories in China and suggested consumers make a “green choice” when buying clothes.

A report  led by Ma Jun and his Institute for Environmental and Public Affairs  and released this week lists 6,000 water pollution violations by manufacturers  of goods that ranged from sports apparel to luxury handbags.

Brands were linked to the factories over seven months of painstaking review of official websites, financial reports, recruitment ads and procurement bids, among other documents, according to IPE.

Over the past eight years the Institute has gathered a database of over 90,000 air and water violations from official government  sources. IPE now works with many brands to make sure they are not using polluting suppliers and to help clean up those that are illegally dumping untreated toxic waste water into rivers.

Between march 22 and March 29  the five environmental groups wrote to the CEOs of each of the 48 brands linked to factories with repeated environmental violations. They asked the brands to ensure their Chinese suppliers would not pollute the environment while manufacturing their products.

While some of the brands named immediately responded to queries from the environmental groups, acknowledged the issues and detailed how they would address the issues, about two-thirds have not yet engaged, Ma Jun said.

Notably, Spanish clothing retailer, Zara, responded by saying that it was not the company’s policy to answer questions about its business model.

Nike, Walmart, Esquel, H&M, Levi’s, Adidas and Burberry were among the companies that responded positively, saying they would work with their Chinese  contractors to improve their environmental performance. Many of these brands were  already working with NGOs to clean their supply chain, IPE said.

Another 32 brands including Marks & Spencer, Esprit, Calvin Klein, Carrefour, Armani and China-based Anta and Youngor have yet to respond, according to the report.

Besides IPE, the other authors of the report, “Cleaning up the Fashion Industry,” were, Friends of Nature, Green Beagle, Envirofriends and Nanjing Greenstone.

China is a global leader in textile manufacturing, responsible for nearly half the world’s fiber and exporting 34 percent of the garments we wear.

This production has contributed significantly to the country’s GDP but has also taken a heavy environmental  toll locally. Ma said that fashion manufacturers discharge 2.5 billion tons of waste water and chemicals into rivers and the ocean, while 80 percent of effluent is generated in fiber dying.

This has a serious impact on the country’s water supplies and is compounded by the fact that the re-use of water in the textile industry lags way behind that of many others, creating a situation where water efficiency is incredibly low, IPE said.

Among the 6,000 violations, a number of factories were given administrative penalties. Many were told to rectify problems such as illegal effluent emissions via secret discharge pipes, directly discharging waste water into waterways, improper use of waste water treatment facilities and pollutant discharges in breach of standards.

Previously, IPE targeted the IT sector, also with information gleaned from the institute’s violations database. We have written about Ma Jun’s efforts here and here.

After five reports looking at the environmental performance of IT sector contractors, most of the brands named had responded to requests for information disclosure and action.

Among the last hold-outs was Apple, which was the focus of the last two reports. The company has since agreed to disclose its connections to suppliers and provide information on contractor environmental performance.

Clearly, Ma Jun and his colleagues hope for a similar response from another industry that is widely credited with some of the worst environmental performance in China.

With IPE and others watching, retailers and brands will no longer be able to hide behind stated ignorance about how a product is manufactured. They will no longer be able to refuse to divulge lists of suppliers or deny responsibility for egregious environmental emissions locally.

Part of the problem for the apparel sector has been the quantity of suppliers used to manufacture just one item of clothing or shoe. This is a problem we have written about here. 

While many brands are getting better at understanding and working with the factories actually putting together the clothes, they tend to know less about the dyers, the spinners and the knitters who cause much of the environmental damage.

yet engaging with polluting contractors in any part of the supply chain has become a serious reputational risk and thus business risk for global brands hoping to squeeze their suppliers on cost.

It is also a wake up call for consumers hooked on cheap product made at huge environmental expense abroad. It’s about time we all made careful choices about how we consume, make sure that brands are using responsible suppliers.

For companies, the argument turns back to fiduciary duty and redefining what that means, something I have written about here.

In asia, China, china water, Environment, health, pollution, Uncategorized , , , ,
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Pressure Builds on Apple to Improve Suppliers’ Labour, Environmental Performance

Lisa Genasci —  February 1, 2012 — 1 Comment

Articles in the New York Times and elsewhere last week have criticized Apple for using Chinese suppliers whose workers are ill-paid, overworked and subject to hazardous conditions.

In a full-page spread, The New York Times compared Apple’s financial strength and reputation for innovation with a less-flattering portrait of how its products are made: “ …the workers assembling iPhones, iPads and other devices often labor in harsh conditions…  Problems are as varied as onerous work environments and serious — sometimes deadly — safety problems.”

An “outraged” Apple CEO, Tim Cook, responded swiftly in a strongly worded email to Apple employees cited widely, “we care about every worker in our worldwide supply chain” and “any suggestion that we don’t care is patently false and offensive to us.”

The truth is, nothing like the manufacturing capability found in southern China now exists in the U.S. and nowhere in the U.S. could workers be relied on to dedicate the long hours under similarly challenging  conditions.  Recent attention has focused on Apple supplier, Foxconn, where the iPhone is assembled.  The facility has close to a million employees, many working six days a week, often spending up to 12 hours a day at the plant. Many workers earn less than $17 a day.  That clearly helps improve Apple’s margins.

U.S. news show host, John Stewart, last week described Foxconn as “Fear Factory”  and detailed conditions at the factory,  its treatment of employees, large dormitories of employees, repression of employees who try to unionize and nets around the buildings to prevent suicides.  According to Stewart, the cost savings on an IPod is 23 percent to the consumer.

Understandably there is anger brewing in the U.S. toward companies such as Apple that employ tens of thousands of workers outside the United States to take advantage of lax labour laws abroad. There is a growing voice in the United States for a boycott of the ubiquitous Apple products.

In a separate article, the New York Times pointed out that Apple employs 43,000 people in the United States and 20,000 overseas and many more people work for Apple’s contractors: an additional 700,000 people engineer, build and assemble iPads, iPhones and Apple’s other products.

When asked by President Obama last year about overseas workers and whether or not Apple products might be produced at home, Steve Jobs was quoted as replying that those jobs were not coming back to the United States.

According to the same article, the hugely profitable Apple last year, it earned over US$400,000 in profit per employee, more than Goldman Sachs, Exxon Mobil or Google.

The stories on bad labor practices by Apple suppliers, however, follow five reports from a coalition of now 41 environmental groups in China documenting the performance and willingness of IT brands producing in China to address serious environmental violations by their suppliers.

Many of the environmental violations have led to occupational safety issues and hazardous chemical exposure for workers.

In the first of the reports, the environmental groups contacted the CEOs of 29 top IT brands, asking specific questions about suppliers’ environmental performance and provided evidence of pollution violations.  As they look to production abroad to skirt labour restrictions at home, companies look to avoid environmental regulation that should protect air, water and soil from excessive emissions.

The Chinese NGOs’ engagement process has from the start actually yielded fruit, with a number of brands such as HP and Samsung responding to requests for information and addressing issues in their supply chains. But a few, including Apple Inc., ironically were initially extremely slow in communicating, and less than willing to address the supply chain issues being raised

Hence, two of the reports, in January and August last year, focused specifically on Apple, which had failed to disclose adequate information relating to its suppliers or their environmental violations to the environmental groups, led by Ma Jun’s  Institute of Public and Environmental Affairs (IPE).

Most of the recent negative stories about Apple and the building campaign against the company fail to even mention Apple’s environmental lapses – including the New York Times full-page story, except in passing.

The Chinese environmental NGOs campaign to improve disclosure and environmental performance by brands and their suppliers is something we have written about here and here – long before the Apple news became mainstream.

In a significant success for the NGO coalition, earlier last month, for the first time Apple’s  annual supplier responsibility report  released a list identifying many of its suppliers and acknowledging some of their environmental and labour violations first publicized by IPE.

Indeed, a look at the reports showed that more than half of the suppliers audited by Apple have violated at least one aspect of the code of conduct every year since 2007, and in some instances have violated the law, according to the New York Times Story.

IPE’s website list of non-compliant factories in China reached 94,725, while the Water Pollution maps now used by many brands to filter their supply chains and make sure they are not using polluting suppliers, registered 6,220,696 page views.

IPE is now working directly with 30 such brands to screen suppliers and 550 companies have responded to being placed on the polluters list by seeking dialogue with IPE.

Since releasing its list of suppliers and acknowledging environmental breaches, Apple has also agreed to continue conversations with IPE later this month and potentially to encourage two suppliers to engage in a pilot third-party audit monitored by the Chinese NGOs.

In all, 3,122 companies have undergone a third-party audit or a document review audit process and this has led to 94 companies being removed from the polluters list.

In air pollution, china water, pollution, Uncategorized , , , , , ,
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Redefining Fiduciary Responsibility

Lisa Genasci —  December 29, 2011 — Leave a comment

I’ve been thinking recently about Fiduciary responsibility and what that has come to mean over the past two decades of rapid growth.

I’ve been thinking about how and why the interpretation that has crept into investment culture over that period – simply to maximize rates of return  – has slowed an appreciation of investment that doesn’t cause social or environmental harm.

It goes without saying that this has also slowed investment that promotes social good as well as generating returns.

I’ve also been thinking that by itself  this narrow interpretation ignores both business risk and opportunity  – neither of which should be ignored considering the dictionary definition of fiduciary duty:  to act prudently.

Writing in a Capital Institute blog, Stephen Viederman, former president of the US-based Jessie Smith Noyes Foundation, argues that foundations should align program work with investment strategy – something that is all too rare.

“Foundation fiduciaries have an obligation to seek  ‘good’ and ‘competitive’ returns, not necessarily to maximize them,” he says.

Part of the problem has been the accompanying  “myth of financial underperformance from ‘social investing,’ a myth that still lies at the heart of the problem for finance committees who conveniently forget that two-thirds of traditional active managers underperform their benchmarks every year,” Viederman says.

“Yet the profit-maximizing argument–that you will underperform if you do sustainable investing–comes up time and time again in conversations and is never examined by the people who are making it.”

Indeed, most investors are not considering the business risk associated with investing, for example, in a power company, a textile operation or mining business in a region that is water scarce.

Most ignore the reputational risks associated with investing in factories or plants that are polluting, overly consumptive of resources, or engaged in bad labor practices.

“All investments are about the future, but most investment decisions are made on retrospective data, which as fund offerings make clear, are not predictors of future earnings,” says Viederman.

“We need to ask about …  ‘predictable surprises,’ which include climate change, the BP Gulf disaster and the financial bubble among others. …Any institutional investor who ignores them is in breach of their fiduciary duty. To be prudent, as in the prudent person, is in its original meaning, to be farseeing.”

The ADM Capital Foundation launched a web portal, China Water Risk, in October to provide investors and companies with information about water scarcity and pollution in China.

Part of the thesis behind the initiative is that better investment decisions produce better returns in the long run and these usually come with more information – and not the information investors traditionally have sought.

But, certainly, few could disagree that the regulatory environment is changing to reflect resource consumption and that water pricing in the near future will reflect scarcity.

Few could disagree that NGOs are increasingly sophisticated in exposing pollution incidents (see my blog posts on IPE’s Ma Jun and Apple, on Greenpeace’s Dirty Laundry and other reports) and that local protests in China are growing around pollution incidents.

Workers are no longer content to suffer exposure to hazardous chemicals silently, or work extraordinarily long hours without proper compensation.

All are, potentially, a drag on profits. Would it not then make sense for fiduciary duty to include analysis of  such risk?

Fully Risk-Adjusted Returns (FRR), as they might be called, should certainly not be lower as a result, indeed given the current and future challenges the world faces, they could even be enhanced by additional information.

For those who missed this, one company that is looking to consider the impact of production is PUMA, which earlier this year announced the results of an unprecedented environmental profit and loss screening.

This was a big step toward assigning economic value to resources consumed and to emissions. The value assigned was also a step toward determining the true cost of production of PUMA apparel and shoes.

Results from PUMA's Environmental Profit and Loss Analysis

The analysis showed that raw material production accounted for the highest relative impact of Greenhouse Gas Emissions and water consumption within PUMA’s operations and supply chain.

According to PUMA’s report, the direct ecological impact of company operations translated to the equivalent of 7.2 million euros of the overall impact valuation. An additional 87.2 million euros was distributed along the four-tier supply chain.

Thus, the overall environmental impact of GHG and water consumption amounted to 94.4 million euros. That compares to a third-quarter net profit of 82 million euros.

“By putting a monetary value on the environmental impacts, PUMA is preparing for potential future legislation such as disclosure requirements,” the company said.

“By identifying the most significant environmental impacts, PUMA will develop solutions to address these issues, consequently minimizing both business risks and environmental effects.”

Finally, a new and important report from IESE Business school, “In Search of Gama, an Unconventional Perspective on Impact Investing,” steps into the discussion with questions such as:

  • By focusing exclusively on the creation of financial wealth for individuals are financial markets destroying value for society?
  • Is social responsibility a component of investment that is necessarily detrimental to financial return?
  • Should changes be made in the taxation and supervision of financial transactions to account for financial markets’ responsibility to society?

Clearly, business as usual is no longer smart business and change is imminent. Considering the impact of investments and reconsidering how we make investment decisions will be the way forward.

Let’s start  by redefining fiduciary responsibility, considering Fully Risked Returns. Clearly, returns may actually be enhanced either when viewed through the lens of an appropriate risk framework/weighting or in reality as a result of a superior business environment.

In air pollution, asia, carbon, china water, Environment, health, Hong Kong, impact investment, Microlending, Philanthropy, pollution, social enterprise, water , , , , , , , , , , , , , , , ,
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Gaining Traction in the Race to Protect Sharks

Lisa Genasci —  December 11, 2011 — Leave a comment

I’m still surprised when other conservation funders or even NGOs ask us why we work to protect sharks, indicating that this is a “single-species” issue among a platform of ADMCF initiatives that generally is much broader in tone.

I’m surprised when we have to point out that there are at least 440 species of sharks and that as apex predators they are critical to the health of our oceans. This is in no way a single-species issue and ultimately is integrally connected to the health of our commercial fisheries.

The initiatives against consumption of shark fin soup we support have much more to do with protecting our oceans, which are in significant decline. At least a third of shark species are threatened with extinction and some species have dropped in numbers by as much as 90 percent in recent years.

Sharks cannot easily recover from overfishing because they reproduce slowly, taking years to mature and producing few offspring. If we continue to fish shark at current rates, they simply won’t be part of our ocean life in the not too distant future, with potentially disastrous consequences for us all.

For 400 million years sharks (despite their negative image largely, thanks to Jaws) have helped to maintain and regulate the balance of our marine ecosystems. We don’t know exactly what our oceans would look like without sharks but we do know there would be significantly less biodiversity. Studies have shown that regions where there are more apex predators have more biodiversity, while areas without them show clear absences.

Still, every year perhaps as many as 73 millions sharks are caught – tens of millions of these for their fins alone. Although many sharks are landed and brought to shore with their fins attached, in order to save space on fishing boats, in many instances sharks are finned at sea and the body is discarded into the oceans, meaning the sharks drown. Any food value in the large body is wasted.

And Based on FAO statistics, global shark catches are likely to be underestimated by an astonishing three to four-fold.

Hong Kong plays an important role, with 50 percent of the shark fin trade passing through the city – much of it re-exported legally or illegally to China and the rest consumed locally, mostly at wedding or corporate banquets in soup.

Shark finning is an issue that ADMCF has been working with local conservation groups to highlight and advocate against in Hong Kong. Over the past five years we have supported  research, appeals to the hospitality industry and rest of the corporate sector  to stop serving and consuming shark fin soup.

With local organizations we have worked to build awareness among the general public about the biodiversity consequences of decimating our shark populations. Legislators have been approached to push the Hong Kong government to consider at least ceasing the consumption of shark fin soup at government banquets – something that in reality should be easy since the dish is expensive!

Ultimately, of course, we would all like the Hong Kong government to follow the world trend and consider a ban on the shark fin trade in Hong Kong.

Earlier this year, Bloom released important research on local attitudes to shark consumption that was publicized widely in local Chinese and international media. This research fundamentally changed the debate– from shark fin as an untouchable cultural issue to a global concern characterised by changing local attitudes.

And in an encouraging recent decision, the Hong Kong & Shanghai Hotels announced a ban on shark fin at all outlets including its Peninsula hotels as of Jan. 1. This was a major shift and key step in engaging Hong Kong’s leading hotels on a collective ban. Conservation International and Bloom Hong Kong are organizing a meeting of top Hong Kong hotel executives in January  2012 to discuss what initial steps they might take toward removing shark fin from restaurant menus.

Meanwhile, WWF and the HK Shark Foundation have managed to sign up more than 110 companies and industry groups in Hong Kong to a pledge not to serve shark fin soup or consume other shark products in the course of official business. Many others have privately committed to follow the ban but have asked not to named publicly.

Indeed, the number of shark conservation organisations in Hong Kong pressuring the government, the corporate community and the trade is at an all-time high. Social and mainstream media shows that public sentiment is shifting and the momentum against consumption of shark fin is continuing to build both here and abroad.

Increasingly people do understand the importance of sharks to our marine ecosystems. There is little doubt in most minds that protecting sharks is not a single-species issues.


In asia, china water, cultural preservation, Environment, Fish, Hong Kong, Marine, Philanthropy, pollution, Uncategorized, water , , , , , , , ,
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China Water Risk: Why we Should Care

Lisa Genasci —  October 9, 2011 — Leave a comment

Concern is growing globally about water resources and the potential for conflict in regions where they are scarce. But are investors and businesses in Asia adequately factoring water into risk assessments?

A recent Neilson study showed that worry about water shortages has overtaken global warming as the top issue, with 75 percent of respondents identifying this as something they worry most about. That represents an increase of 13 percent over the previous year.

And the concern is not without basis. Worldwide, almost 1 billion people lack access to safe drinking water while 70 percent of industrial waste in developing nations is dumped untreated into waterways, further limiting what is often already stretched supply.

Yet investors and leaders of industry may not be paying attention, considering water challenges simply an environmental problem rather than a fundamental business risk.

In China, the water landscape is particularly stark. We hear much about that country’s economic growth averaging 10 percent over the past 20 years, the massive and wholesale transformation of the economy at rapid pace, but not so much about the horrendous cost to the environment that already weighs heavily on GDP .

We hear much less about the dead and dying rivers, the over-pumped aquifers, the creeping desertification in previously agricultural areas, the thinned soil from over-use of pesticides, the power plants without adequate water to function, the massive and growing health care costs from poisonings and escalating cancer rates.

We hear very little about the growing numbers of protests nationwide linked to pollution incidents.

The government is clearly concerned.  The official response in China has been  a tightening regulatory environment, and a move toward real pricing of the precious resource, or the investment opportunities that an inevitable clean up will bring.

The recently approved, 12th five-year plan for the first time features climate change and energy, sets lower growth targets for the country and favors investment in industries that promote pollution clean up and cleaner processes generally.

Clearly, there are thus significant ramifications across a broad range of industries in China but are investors prepared? Are they staying ahead of the water risk curve, engaging in the due diligence and mitigation efforts needed to survive the inevitable and seismic shifts around water?

China Water Risk (CWR) is ADMCF’s redesigned follow-on from Asia Water Project, the pilot initiative launched 18 months ago to inform investors and companies of both risk and opportunities around water crisis in China.

This initiative, which launches later this month at www.chinawaterrisk.org, is designed to influence capital allocation to industries in China located in water-appropriate regions, with solid mitigation strategies built around water.

A brief portrait of water in China tells the back story.

Per capita global water resources are 6,280 cubic meters on average but people in China have less than 1/3 of that amount at 1.816 cubic meters.

So, the country with 20 percent of the world’s population has access to only 7 percent of global water resources, while an estimated 300 million people in the country are without access to safe drinking water.

And this is not just a problem for rural areas in China. In 2007, research showed that 60% of China’s cities faced water scarcity and 110 cities faced serious water shortages.

Despite already limited access to water in china, horrendous levels of pollutants are allowed to spill untreated into waterways and seep into aquifers from agriculture and industry in China.
Last year, the Ministry of Environmental Protection said serious pollution violations numbered on average 10 every month.
In all, an estimated 90 percent of urban groundwater is contaminated with pollutants and the quality of 40 percent of that is getting worse, according to China’s Ministry of Environmental Protection.

Pollution of groundwater follows from the low urban sewage treatment rate, which was only 73 percent in 2009, according to a recent article in China Business Times. Hundreds of new sewage treatment plants have been built nationwide in recent years and sit idle because of the high cost of operating them.

The Beijing-based Institute for Public & Environmental Affairs in its water pollution map (an inspiration for China Water Risk and a CWR partner) lists hundreds of violations by sewage plants.

According to the Ministry of Environmental Protection, 77 percent of 26 key lakes and reservoirs, 43 percent of 7 major river basins are considered unfit for human contact.  Meanwhile, 19 percent of monitored rivers and basins, 35 percent of lakes are reservoirs are believed unfit even for agricultural or industrial use.

The World Bank has warned of “catastrophic “ consequences for future generations if the government does not act to solve quickly the acute water shortage and pollution problems. The report urged new pricing, management and regulatory strategies.

In China, agriculture has been by far the largest consumer of water at 62 percent, and the largest polluter, with pesticides and fertilizers responsible for about half of contamination of waterways.

With water scarcity becoming more evident, waterways increasingly unfit for irrigation coupled with the fact that China holds only 7 percent of the world’s arable land, food security has by all accounts become of national concern.

Part of the problem around agriculture and food security in China has been that regions south of the Yangtze account for 33 percent of the country’s total farmland and 83 percent of the country’s water resources. North of the Yangtze, however, lies 67 percent of national farmland but only 17 percent of water resources

Exacerbating the problem, the country is the globally the largest consumer of pesticides and this has contributed heavily not only to aquifer and waterway pollution but to depletion of farmlands.

Meanwhile, as environmental and labor regulations tightened in the West pushing up prices at home, Foreign Direct Investment has flooded into China, fueling the factories, building the industry that is now feeding, clothing and housing the world.

Last year, FDI was estimated at $105.7 billion, surging 17.4 percent over the previous year. This is also helping build a huge middle class and affluent consumer market in China that is expected to almost triple to 400 million by 2020.

According to a September HSBC report, already next year China will replace Japan as the world’s largest consumer of luxury items – something unthinkable just a decade ago.

A joint report published in 2007 by the World Bank and the Chinese government estimated the combined health and non-health cost of outdoor air and water pollution at approximately $100 billion a year, or about 5.8% of China’s GDP.

Water pollution, meanwhile, worsens China’s severe water scarcity problems, with the overall cost of water shortages estimated at 1% of GDP.

The weight on economic growth is certainly of concern to Beijing, but equally concerning is the growing discontent in China related to pollution incidents and scarcity. In 2005, the last year for which government figures have been released, there were an estimated 50,000 protests nationwide related to pollution incidents.

This comes in response to significant growth of so-called cancer villages, or clusters of cancers invariably located near heavily polluting factories, fast-growing rates of urban cancers and outbreaks of illness or poisonings related to drinking polluted water.

Many of these protests have been centered around specific polluters and in several instances have forced factories or power plants to close. This then involves not just reputational risk but threatens serious economic losses for polluters.

There are also additional considerations around political risk.  Concern is that as climate change potentially exacerbates the country’s water shortages, the government sees the need to exert further control over domestic water resources with far-reaching consequences.

Of the 261 International rivers globally, 15 originate in China, including the Mekong, Ganges, Brahmaputra and Indus rivers. These international rivers span 16 nations and China has no formal agreements or treaties regarding the use of these rivers with any of its neighbors.

What is patently clear, is that no investor or business leader can step into China without carefully considering the water challenges facing each industry and then positioning to mitigate risk.  At the same time, don’t investors and business leaders want to position themselves to take advantage of potentially huge opportunity?

In asia, carbon, china water, Environment, health, Philanthropy, pollution, Uncategorized, water , , , , , , , , , ,
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Can Fast Fashion Also be Sustainable?

Lisa Genasci —  May 23, 2011 — Leave a comment

I keep hearing about how expensive sustainable fashion inevitably is and that since we are used now to so-called fast fashion, it’s just not practical to think we will easily give up cheap apparel. But is greener fashion really more expensive? And how can we educate consumers  on this topic? These were two issues discussed during a panel I moderated last week as part of the Redress Forum in Hong Kong.

Among other featured topics during the day of presentations were, the business of sustainability, eco-labelling, best practice and inspiring the next generation.  The sense after a day of conversation was that there is still far to go in terms of really producing apparel that is truly sustainable for a mass audience and that the myriad eco-labels are often confusing to the buyer, designer AND the consumer.

In terms of waste, there is little that helps a consumer understand the recycled content of clothing and Hong Kong-based Redress announced it was introducing a new consumer-directed label that would help. A major fashion brand will be introducing this label shortly along with a new eco collection that includes a high percentage of recycled textiles – an exciting development here!

Although in the UK, for example, the sense among younger designers is that sustainable is the future, in Hong Kong, whether to wear fur even in summer seems more of a concern than sourcing green clothing, according to HK Tatler fashion editor, Arne Eggers. In the land where luxury is king and brands are everything, even the Tatler Green issue struggles for advertising, he said.

Still, also on my panel, “Educating and Engaging Consumers” was Tobias Fischer, regional CSR  manager Far East for H&M and he said that for his company sustainable equalled cost-saving. He became irritated every time sustainable fashion was described as more expensive, pointing out that sustainable involves saving costs on energy, water, chemicals, textiles etc.

“Current manufacturing is not factoring in the true cost of production,” said Filippo Ricci of UK’s From Somewhere and co-founder with Orsola de Castro of Estethica, established five years ago to showcase young designers committed to working eco sustainably as part of London Fashion Week.

And of course he’s right. In developing nations with few enforced regulations, the factory dying process causes untold damage to rivers and downstream populations when waste is simply pumped into waterways. Meanwhile, excessive chemicals used to grow cotton pollute the topsoil, groundwater and again damage the health of agricultural workers.

Heavy use of energy, often from coal, to produce apparel that satisfies our seemingly uninsatiable appetite for clothing means power plants must pump out waste emissions that pollute our air. Excessive consumption of water, particularly in already water-scarce regions (many of these in China) further limits supplies for future generations.

With consumption of clothing 60 percent higher over the past decade and the cost of clothing lower than ever, it just is not realistic to think that factories can continue to pump out product that doesn’t factor in any of the social or environmental costs of production. Already, with labor prices in China rising as living standards improve and regulation there tightens, inevitably costs  even of fast fashion will have to rise.

Meanwhile, however, many brands are simply taking their business elsewhere – looking to Vietnam, the Philippines and Indonesia among others to maintain the rock bottom prices we have come to expect, particularly from discount stores such as Target and TJ Max in the U.S.

In air pollution, asia, children at risk, china water, Environment, health, Hong Kong, Philanthropy, pollution
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Most in Hong Kong Willing to Give up Shark Fin Soup

Lisa Genasci —  April 30, 2011 — 1 Comment

Photo by Alex Hofford 

Recent research has shown that the vast majority of people surveyed in Hong Kong would be happy without consuming shark fin soup at a wedding, even though it has become the status symbol of choice for couples getting married here.

This shows attitudes toward the dish may finally be changing. Much of the debate around the consumption of shark fin has centered around cultural attitudes, with some in the trade trying to define the discussion as an East versus West issue when really it is simply a matter of protecting our already depleted oceans.

The reality is that tens of millions of sharks are killed each year to satisfy our appetite for the tasteless delicacy and as a consequence their populations worldwide are at high risk of extinction. Sharks are integral to the health of our oceans.

By contrast, consumption of the soup began with the Song dynasty (960-1279) when the expense meant this was the privilege only of the wealthy and this continued to be the case until the 1970s. Then, new wealth in Asia made shark fin accessible to more people and its consumption became associated with status – an important feature of any wedding and significant business banquet.  At the same time, more destructive fishing practices designed to dramatically escalate the catch helped make expanded consumption of shark fin possible.

Clearly, this is now a lucrative trade estimated at US$1 billion, with prices still high for the fins, which are often removed from the shark at sea. Frequently, the shark body, considered of lesser value, is thrown back into the sea where the shark is left to drown without its fins. An estimated 50 percent of the trade passes through Hong Kong, which also is where a significant portion of the consumption also occurs.

So the Bloom survey forces us to reconsider the assumption that people in Hong Kong believe eating shark fin soup at a wedding is non-negotiable in a city that is traditionally more focused on status than sustainability. The survey showed that may be changing.

In reality, 70 percent of people surveyed said that they had consumed shark fin at least once in the past twelve months and 90 percent of these at a wedding banquet. Tradition rather than taste was the main reason people said they eat shark fin and 87 percent of the time it is consumed as part of a set menu rather than chosen as an a la carte offering. Of the people surveyed, 43 percent had thought about a replacement dish, indicating that perhaps they were thinking about the sustainability issues around consuming shark fin.

The Bloom survey was conducted by the University of Hong Kong Social Sciences Research Centre. Bloom, WWF and the Hong Kong Shark Foundation are working effectively in Hong Kong to build awareness around the environmental issues associated with shark fin products and decrease their consumption.


In asia, china water, cultural preservation, Environment, Fish, Food, health, Hong Kong, Uncategorized
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Ma Jun on Apple Inc. in the SCMP

Lisa Genasci —  April 8, 2011 — Leave a comment

A Greener Apple: SCMP Op-Ed April 7, 2011

When Apple announces profits for the second fiscal quarter this month, analysts expect record figures amid a slew of new products. The previous quarter was already a record for Apple, which posted revenues of US$26 billion and profit of US$6 billion. The question we should ask, then, is: does a company with a solid reputation for being on top of its game have a responsibility to manufacture without excessive environmental and social cost?

The well-documented poisoning of workers and violation of environmental regulations at some of Apple’s key suppliers shows there is an obvious gap in environmental and socially responsible management throughout the company’s supply chain.

Over the past nine months, Chinese environmental organisations have pushed global and local IT brands to recognise social and environmental problems within their supply chains and resolve them. Among the 29 brands targeted, Apple was the only company to be evasive, if not completely unresponsive.

Recently, Apple admitted that 137 workers were poisoned but continues to place the blame with the supplier, Wintek.

Throughout their lifecycle, from material extraction to production, and from consumer use to disposal, electronic products have the potential to affect human health and the environment through the release of chemicals and energy consumption. Printed circuit boards and battery production, in particular, create heavy metal pollution.

Part of the problem, of course, lies with the consumer, whose demand for cheap goods means the purchased item doesn’t reflect the true cost of production – the toll on the environment,and on public and worker health.

Furthermore, information technology companies continue to produce goods that have obsolescence built in – meaning we consume endlessly, looking for the latest product. Who should bear those costs? In the case of poisoning and pollution incidents, the violating supplier has a responsibility, as does the government department where a lack of supervision may have caused the incident.

However, a company such as Apple cannot avoid its own responsibility either. Amid economic globalisation, Apple has not retained any of its own factories and even the production of parts as small as screws has been outsourced. That does not mean pollution and occupational injuries during the manufacturing of Apple products have disappeared.

We must remember that suppliers who violate environmental standards and ignore workers’ health do this to cut costs. Analysis of the distribution of profits in the supply chain for the iPhone 4 has shown that, for each iPhone 4 selling for US$600, Foxconn and other Chinese assembly companies receive only US$6.54. Apple’stakings for each iPhone 4, on the other hand, is up to US$360.

With power comes responsibility. Is it really fair for Apple to grab most of the profit yet shirk responsibility for environmental pollution and worker poisonings in its supply chain?

Apple claims that “we require that our suppliers provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes wherever Apple products are made”. But environmental protection groups have found that Apple has seriously violated its own promises. Yet, the company is deeply involved in supply chain management – from the choice of materials to the control of dust levels in the production process.

At present, China’s environmental-information disclosure is expanding, meaning that many companies’ environmentalviolation records can be acquired by the public. Brands have already started using this information to ensure suppliers are not in violation of local environmental laws.

Apple needs to change its opaque supply chain and social responsibility management system, and work to overcome problems in its supply chain

Ma Jun is director of Beijing’s Institute of Public & Environmental Affairs

In air pollution, asia, carbon, china water, Environment, health, Hong Kong, pollution, water
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Many Hong Kong Vegetables Contaminated With Heavy Metals

Lisa Genasci —  March 12, 2011 — 1 Comment

Hong Kong vegetables, mostly imported from the mainland, contain high levels of lead and traces of other metals, including cadmium, according to research released last week by the Hong Kong Baptist University. This followed last month’s revelation by Chinese government scientists that 12 million tons of Chinese rice are contaminated with heavy metals.

The Baptist University tests were of 93 vegetables imported from the mainland and bought at local Hong Kong street markets or supermarkets, as well as of produce grown on Hong Kong farms, between September and December last year.

The most contaminated vegetable was apparently mainland-grown choy sum, which is also one of Hong Kong’s most consumed vegetables.

An article in the South China Morning Post on Friday showed that although the levels of lead in the study were 2.8 times higher than the global standard, they were acceptable under Hong Kong regulations. Traces of Cadmium also were found in some vegetables.

According to the SCMP, Hong Kong’s standards are shockingly 20 times less stringent than those of the World Health Organization, the European Union or Australia.

Author of the study, Professor Jonathan Wong Woon-Chung of Baptist University’s Hong Kong Organic Resource Centre told the Standard that ninety percent of vegetables in Hong Kong were imported from the mainland.

“The result demonstrates that lead pollution in mainland farm produce is serious,” he was quoted as saying.

In China, heavy metal pollution in crops comes mostly from contaminated irrigation water, pesticides or excessive application of chemical fertilizers and hormones as well as direct heavy metal contamination of the soil as a result of emissions from nearby factories.

Long-term consumption of vegetables polluted with heavy metals can contribute to cancers as well as damage the nervous system. Excess cadmium can also cause kidney stones, while excess lead can affect brain activity in children.

Wong pointed out in the SCMP article that leaf vegetables such as choy sum and spinach were more likely to absorb heavy metals. He suggested people alternate between these and fruit vegetables such as tomatoes and eggplants.

China has recognized that food security is a real issue for the country, following scandals over melamine in baby milk and many others that have caused unrest in many parts of China following discovery of contamination.

In February the SCMP reported that government scientists revealed millions of acres of Chinese agricultural land and 12 million tons of grain, or about 10 percent of the country’s rice crop, were contaminated by heavy metals. China’s southwestern provinces, where much of the country’s export manufacturing is concentrated, were particularly contaminated, according to the article.

Potential economic losses from the contaminated rice, which is enough to feed more than 40 million people, hit 20 billion yuan or HK$23.66 billion a year, the China Economic Weekly said, citing 2007 statistics from the Ministry of Land and Resources.

China is also confronting a serious and potentially costly health crisis, with clusters of “cancer villages” springing up downstream from factories and near mines.

At  the annual plenary session of China’s parliament this past week, soil contamination was a topic of urgent discussion.  In a news report on China.org Jia Kang, a CPPCC National Committee member and head of fiscal science at the Ministry of Finance, called for legislators to begin drafting a soil protection law.

Jia was quoted as saying that land pollution already threatens the sustainability of economic growth and social stability.

Meanwhile, the same site quoted Health Minister Chen Zhu as saying that comprehensive evaluations of health risks from soil pollution are underway. Environment Minister Zhou Shengxian in recent months has said he will work to curb soil pollution during the period of the current, or 12th, Five-Year Plan – a framework for China’s economic development over the period.

The most recent plan, introduced at the parliamentary session this past week, calls for China to step away from exclusive focus on rapid economic growth to a more balanced development model that includes more benefit sharing and recognizes the environmental challenges the country faces.

The annual parliamentary gathering generally sets the country’s political tone and government priorities.

Let’s hope that food security stays at the forefront of China’s agenda and that we see action from officials both on the mainland and in Hong Kong to protect public health.

In air pollution, asia, china water, Environment, Food, health, Hong Kong, pollution, water , , , , , , ,
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The True Cost of Trendy Jeans: Polluting Water in China

Lisa Genasci —  March 6, 2011 — 5 Comments

Greenpeace photo of worker and wastewater textile discharge

 

 

 

 

 

 

 

 

 

 

That trendy shirt or pair of jeans, the underwear we buy these days mostly comes with a “Made in China” label.  When choosing clothing presumably we think first about style and second about price. Can we afford the style and quality? We rarely think about the environmental or social cost of the item, the “true” cost of manufacturing a coveted dress.

We don’t know about the dye that washes into the local rivers where the item is made, the chemicals spreading downstream from manufacturing plants, contaminating water supplies and making local people sick. We want, we can afford, we buy. But should we without knowing how our clothes are made and the damage they do in the process?

Last year, according to the American Apparel and Footwear Association, Americans spent about $340 billion on clothing and shoes, accounting for 75 percent of the global market. Of that, 99 percent of shoes and 98 percent of clothing was made abroad, where environmental and social laws are less stringent and enforcement of those that do exist is significantly looser.

The trouble is, many of the clothes we wear, particularly the cheapest, are highly polluting to produce at the low cost-point. According to the World Bank, 17 to 20 percent of industrial water pollution comes from textile dyeing and treatment, and there are at least 72 toxic chemicals in our water that originate solely from textile dyeing. Of these, 30 cannot be removed.

That’s a real problem for the textile industry: In China, Polluted water causes 75 percent of diseases and over 100,000 deaths annually, the World Health organization has said. Meanwhile, cancer rates among villagers who live along polluted waterways are much higher than the national average.

Estimates are that 70 percent of lakes and rivers in China are polluted, as well as 90 percent of the groundwater. In all, an estimated 320 million Chinese do not have access to clean drinking water – more than the entire population of the United States.

It used to be that clothing was made close to home, so we knew when a textile mill or garment manufacturer was polluting the local water or air and U.S. mill towns experienced some of the same problems China now faces, with local rivers often fetid and colored by dye. With greater awareness of the hazards, then years of battling, government regulatory authorities set tougher environmental and labor standards to make sure production wasn’t exploitative or damaging to our air and water. Manufacturers were forced to comply, installing capture equipment on smokestacks and treating any wastewater before pumping it into rivers.

But that made clothing more expensive to produce and then with the opening of China in the mid-1970s and the growing availability in the 1980s of cheap labor along with manufacturing capability, most of the production process gradually shifted there. Eventually, environmental and social laws were put in place in China too but often local enforcement is limited and corruption rampant.

That has meant many factories and textile mills have been able pollute at will. When they have been fined for violations, the fines are often insignificant relative to profit. That, and the fact that an abundant migrant labor force comprised of some of the hundreds of millions who previously lived below the poverty line and were willing to work for cheap, meant clothing could be produced at prices that didn’t factor in either the real cost of labor or the environmental damage.

Those costs were left for future generations to cover in health care, clean-up and other forms of support.

The result is that we are all now hooked on the irrationally cheap. Prices on fabric and clothing imported to the U.S. have fallen 25% since 1995, partly due to the downward pricing pressure brought by discount retail chains, according to an article in the Wall Street Journal.

Still, in China, the future is now. While migrant workers, now with a better standard of living, want fair wages and benefits such as health insurance, the Chinese government recognizes that the holy grail of economic growth at the 10 percent plus levels seen over the past two decades is unsustainable if the rampant environmental degradation continues apace.

Unrest has been growing across the country, particularly around perceived labor and environmental violations, with tens of thousands of mostly small protests annually, many of them unreported.

Besides the cost of cleaning up contaminated water, land and air, pollution will cost China billions in additional health care, lost productivity and early mortality, dragging down growth, the government recognizes.  The World Bank in a 2007 report estimated China’s environmental costs at around $100 billion a year, or about 5.8 percent of GDP, including the impact on mortality.

So any way you look at it, those clothes we like to buy in abundance, and have been taught in recent years to purchase and throw away without thought because prices are so cheap and styles constantly new, are a real problem for the environment, for workers who make them and ultimately for China’s economy.

In a report released in December, Greenpeace recounted time spent in two textile industry towns in Guangdong province:  Xintang, the “Jeans Capital of the World,” and Gurao, a manufacturing town 80% of whose economy is devoted to bras, underwear, and other clothing articles.

Greenpeace testing found five heavy metals (cadmium, chromium, mercury, lead, and copper) in 17 out of 21 water and sediment samples taken from throughout Xintang and Gurao. In one sample, cadmium exceeded China’s national limits by 128 times.

Xintang, known as the “Jeans Capital of the World”, produces over 260 million pairs of jeans annually, equivalent to 60% of China’s total denim production, and 40% of the jeans sold in the United States each year.

Gurao, “the capital of sexy,”  in 2009 produced 200 million bras, or enough for every third woman in China to have one. But this prosperity has come at the cost of the degradation of the local river, the Xiao Xi.

Villagers told Greenpeace that the dirty, fetid river is no longer fit for drinking or laundry. Fish no longer live in the river and people living nearby complain that they must endure the stench from the wastewater. When the river overflows, their yards and homes are flooded by wastewater.

Unfortunately, Gurao and Xintang are not unique, representing just 2 out of 133 textile manufacturing cluster towns where there exists unregulated or at least tolerated hazardous chemical use and release – all in the name of economic growth and jobs.

True, the rise of China over the past few decades has been startling, and the achievements not to be forgotten. In no other time in history has one government accomplished a similar feat: Pulling some 300 million people out of poverty. The questions remain, however, around the price of that transformation and how the government will choose to address this looking forward.

Indeed the 12th five-year plan, unveiled in March, includes provisions for reform that involve working to rebalance China’s Economy and improve livelihoods.  The government is keen to shift the growth model from export and investment driven to domestic consumption drive, and will focus on the quality of economic growth, not just the growth rate itself, perhaps reducing GDP targets to around 7 percent. There will be additional investment in alternative energies and a push toward promoting less-polluting industries, with a shift away from more polluting producers.

As wages rise in China, however, this is a trend that is already underway, with some of the dirtiest factories moving to Bangladesh, Pakistan and Vietnam, where regulations are even lighter and costs less. Once again, rather than cleaning the supply chain and charging higher prices to reflect cleanup costs and higher wages, some brands are just looking further south.

Luckily, this is not universally the case. There are retail brands that are looking to improve their own supply chains and influence the industry more broadly.

In March a coalition of retail companies, apparel and shoe manufacturers, fashion houses, non-profits, and the U.S. Environmental Protection Agency launched a new organization that seeks to reduce the environmental and social impacts of the clothing industry worldwide.

The Sustainable Apparel Coalition (SAC), which includes Wal-Mart, Hanes, J.C. Penney, Nike, Gap Inc, H&M, Levi Strauss, Marks & Spencer, and Patagonia, among others, will help to develop improved sustainability strategies and tools to measure and evaluate sustainability performance. The group of thirty organizations began working on this informally last year.

The group announced it was developing a database of the environmental effects of every manufacturer, component and process in apparel production, with the aim of using the gathered information to give the garments a sustainability store.

Part of the problem for the apparel industry is the complexity of the supply chain. There are many bits and bobs that go into producing our clothes and each piece may be produced in a different factory and then assembled in yet another. That means accounting for the environmental impact of any one item of clothing, tracing the zippers, the buttons, the natural fabric, the dyed fabric, is quite a feat.

Still, for the new coalition, tracing the various parts that make up one jacket or pair of trousers is the goal, along with conveying that information to the consumer. The idea is that eventually there is a label that allows shoppers to see how well their coveted item of clothing is produced and learn about its impact on both the planet and people.

And as consumers we all have a responsibility to think about how much and how we consume. Are our expectations around price and how long we use an item of clothing unrealistic?

In air pollution, asia, carbon, china water, Environment, Fish, Food, impact investment, Philanthropy, pollution, Uncategorized, water , , , , , , , ,
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Sustainable Seafood – A Sea Change?

sleclue —  February 24, 2011 — Leave a comment

The following blog post was written by Sophie Le Clue, director of ADMCF’s environment program:

Two weeks ago I attended Seaweb’s annual seafood summit in Vancouver. Aptly named ‘Responsibility without Borders’, it was attended by more than 700 industry representatives, NGOs and academics, from 30 countries.

These constituents gathered to discuss the different aspects and perspectives of the world’s fisheries.   In a previous blog (Catch it if you Can) I focused on the worrying situation facing our oceans as a result of intense and industrialised overfishing. 

A fairly bleak picture was painted, with huge environmental impacts and fisheries’ collapse imminent if we carry on business as usual. Not to mention the more immediate demise of certain fish species such as sharks, blue fin tuna, orange roughy and chilean sea bass.

However, with both a heavy industry and NGO presence, the summit showcased the progress that is being made in fisheries management, including improved traceability, the reported recovery of some stocks and on a slightly alternative note, the sustainability of eating seafood when compared to livestock – more on that later.

Ray Hillborn pointed out that not all capture fisheries are unsustainable – and that fish stocks in aggregate are stable rather than declining, based on data from N America, Europe, Australia and New Zealand.

Partnerships with NGOs and constructive engagement appeared to be a driving force behind the sustainable seafood ‘movement’ and the improvements that are emerging.

There was however a notable gap – which as you may have guessed, is the implication of seafood production, consumption and fisheries management in Asia and in particular, China.

A question raised at the summit hit the nail on the head, :– how can you keep growing sustainable seafood production/consumption without engaging the world’s largest seafood producer and market – the answer posed was simply – you can’t.

According to FAO, China is by far the largest fish-producing country, with production at 47.5 million tonnes in 2008.  This represents 17% of the world’s capture fisheries and 62% of world aquaculture production of fish, an impressive figure considering that aquaculture represents 46% of the total fish food supply globally.

Already the world’s largest seafood market, China is touted to become the world’s largest seafood importer by the end of the decade.

Annual per capita fish consumption globally is on the rise – 12.6kg/capita in the eighties has risen to 17.2kg/capita by 2009. China accounts for most of the global increase in per capita consumption and its consumption is 55% higher than the world average at 26.7kg/capita. Interestingly, Hong Kong with its relatively small population of nearly 7 million, appears to have a voracious appetite for seafood with per capita consumption estimated at over 64kg/year.

Unfortunately FAO statistics indicate that room for optimism is limited.  Of global fish stocks it estimates that : 32% are over exploited, 53% are fully exploited,  12% moderately exploited and  just 3% underexploited – not leaving much room to satiate the world’s expanding population and appetite for seafood.

It’s all the more fitting then and indeed a sign of the times, that for the summit’s tenth anniversary, Seaweb has elected for the first time to host the event in Asia – with China’s neighbour, Hong Kong Special Administrative Region, as the selected venue. 

Food glorious food : land versus the sea

Returning to the livestock issue and the comparative impacts of land versus sea-based food production, Ray Hillborn hypothesised that the comparative environmental cost of fish is lower than land-based livestock.

Whilst this is not a reason to take an eye off the sustainability issues facing our oceans, – it warrants some thought, especially for the voracious meat eaters among us.

Mr Hillborn presented the findings of a review he undertook recently of existing research and it makes for interesting reading.  As he points out, the actual numbers he unearthed are not so important in terms of accuracy, but the scale is significant – there are clearly significant environmental costs associated with meat production (Box 1).

On energy efficiency, a paper by Peter Tyedmers (albeit ten years old) was presented, also showing quite clearly the inefficiency in food production on a sliding scale, with meat production being the worst (Box 2) – queue obvious implications for climate change. Hilbourn was nevertheless at pains to keep reminding us that fisheries do have environmental impacts.

Annual production Box 1. The environmental cost of food production
Water use (km3) / yr Fertilisermillions of tonnes / yr Pesticides  thousands of tonnes /yr AntibioticsTonnes / yr Soil loss millions of tonnes /yr Greenhouse gases/yr tons CO2 per tonne live weight
Beef 619 12 76 1998 307 11.3-18.3
Chicken 178 13 79 5085 318 1.4
Pork 598 20 121 4994 487 2.3-4
Capture fisheries ? 0 0 0 0  
Atlantic cod trawl and gill net 0.9-3.8
Atlantic herring purse seine 0.07-0.36

 

Box 2. Energy efficiency and food production
Production method Energy efficiency (%)
Mussel farming (Scandanavia) 10*
29 North Atlantic fisheries 9.5
Carp farming (Israel) 8.4
Turkey farming (US) 7.7
Tilapia pond culture (Zimbabwe) 6.0
Swine (US) 5.6
Eggs (US) 3.8
Chicken (US) 2.9
Lamb (US) 2.0
Beef (US feedlot) 1.9
 * as an example this means for every 1000 cals of energy put in, you get just  10 cals out

On aquaculture, although there are justified concerns over environmental impacts and   feeding fish with fish (a common practice for many farmed species such as salmon),   it was useful to be reminded that the alternative for using fishmeal for aquaculture is to use it for chicken, beef and pork.

The problem with this is the efficiency of conversion to protein – significantly less protein is produced per unit of input compared to fish. Better then to use fishmeal for fish?

The takeaway for me, is not to eat more fish (unless it is sustainably sourced) given the state of our seas and fisheries.  

But, considering the highly industrialised methods of land-based food production and the associated environmental degradation, energy inefficiency, climate change and biodiversity impacts – then vegetarianism or at least consuming significantly less meat is an option that more of us should seriously consider, and one that we should educate our children about.

Health and safety issues in livestock production, for both workers and consumers, as well as ethical concerns given the inhumane nature of industrialized animal husbandry are another story and provide yet further justification for us to ponder the ‘less meat’ route.

And of the meat we eat? – as consumers we can vote  as we buy – by purchasing organically farmed and locally grown organic food  – for those who need persuading,  I recommend watching the documentary ‘Food Inc.’

In asia, carbon, china water, Environment, Fish, Food, health, Hong Kong, Marine, Philanthropy, water
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HK Campaign Against Shark-Fin Soup Gathers Strength

Lisa Genasci —  January 23, 2011 — 6 Comments

The campaign against shark-fin soup is building in Hong Kong and perhaps this is a good moment to summarize some of the actions and challenges around educating consumers about this unsustainable dish.

Recently, Legislative Council member, Hon. Audrey Eu, requested the moribund Hong Kong government to clarify its position on serving shark-fin soup at official banquets and to release information about how often the dish was included at state functions.

She also asked the government whether or not it was educating the public about the ecological damage caused by excessive consumption of high-value shark fins, which are often hacked off the still-alive marine animals. The shark body is then discarded in a practice widely condemned for its wastage and banned in U.S. and other waters.

The predictable response from Secretary for the Environment, Edward Yau at a Legco meeting on January 12 was that because of budgetary constraints not much shark-fin soup was served at official functions but that detailed information on this was impossible to gather. “We do not think it is appropriate to lay down guidelines to regulate the kind of food to be consumed in official banquets and meals,” Yau said.

Further, Yau hid behind the traditional government line, which is that HK follows CITES, which allows the trade in all 468 shark species (Yau says there are 320), except the three listed in the CITES appendices, Great White, Basking and Whale Sharks. “At present the laws of Hong Kong regulate the trade in shark species in accordance with the CITES requirements,” he said.

CITES is the Convention on International Trade in Endangered species of Wild Fauna and Flora.

The Hong Kong government showed once again that officials are more concerned with keeping an industry or trade body happy, in this case the Marine Products Association, than in any action against ecological damage or move toward encouraging sustainable fisheries.

Echoing this sentiment, in a recent letter to the SCMP, Robert Jenkins, identified as president of Species Management Specialists and apparently also a consultant to the Hong Kong Marine Products Association, wrote  “There are no valid reasons for Hong Kong’s Department of Agriculture, Fisheries and Conservation to condemn traditional Chinese cuisine simply to satisfy the views of persons and organisations ideologically opposed to human use of marine species for food.”

As justification for this he points again to CITES, which has 180 sovereign states as members and “for 25 years has been the premier international legal instrument identifying wild animals and plant species endangered by trade.” Even for the three listed shark species, Jenkins points out, CITES requires trade to be regulated, not stopped.

The reality is, however, that CITES is primarily a trade rather than a conservation body and as such is inherently political, motivated by issues beyond protection of species. CITES last year at its Doha meeting failed to include a severely threatened shark species, the Scalloped Hammerhead, among its appendices because member states with specific interests were  unable to reach agreement.  Even critically endangered Blue Fin Tuna is not listed by CITES.

Yet the International Union for the Conservation of Nature Red List of Threatened Species, has classified 143 shark species as either critically endangered, endangered, vulnerable, or near threatened with the risk of extinction. That amounts to 30 percent of all shark species and many of the shark fins that we find in Hong Kong markets actually belong to these.

Still, action against the consumption of shark-fin soup is growing in Asia. Illustrating the reputational risk to companies ignoring the issue, shark conservation organizations were again successful in pressuring a Hong Kong bank to withdraw a shark fin soup promotion. Last summer, following similar pressure, Citibank Hong Kong withdrew a shark-fin soup promotion and asked its employees to avoid the delicacy during work events.

Working together, several marine conservation groups recently launched a campaign against Dah Sing Bank  for announcing it would offer a shark-fin soup banquet for 12 to new borrowers.

After a few days of intense adverse publicity, the bank withdrew the offer. Hopefully, other financial institutions locally will also recognize the reputational risk around promoting or even serving shark fin soup at banquets.

Just to recap the importance, shark populations worldwide are facing massive decline. Scientists estimate that the fins of tens millions of sharks are traded globally.   This is devastating to sharks, which are slow-growing, long-lived, late to reach sexual maturity and produce few young.

In other words, the human appetite for shark fin and other shark products simply cannot be sustained.  The consumption of shark-fin soup is a major factor in declining shark populations, with potentially disastrous impacts on the entire marine ecosystem.

Although shark fins are widely regarded as tasteless, shark fin soup is considered a delicacy mainly because of the high price of the fins.  People eat or serve it mostly as a measure of status and a bowl can cost as much as US$400 a bowl.

Shark fins fetch a high price , while shark meat does not. Fins sold in Hong Kong range from about 90 euros to 300 euros per kilogram while shark meat in European markets fetch 1 euro to 7 euros per kilo, according to a Jan 22 letter to the editor in the South China Morning Post written by Claire Garner, director of the Hong Kong Shark Foundation (www.hksharkfoundation.org).

That means the  wasteful practice of shark finning – the cutting off a live shark’s fins and then throwing the body back to the sea – is highly lucrative.

WWF and other conservation organizations in Hong Kong such as Bloom Association, the Hong Kong Shark Foundation, Green Sense, Greenpeace, Shark Savers and others are working in their own way to draw attention to the need to protect sharks.

WWF has managed to persuade many corporations in Hong Kong such as HSBC, the Hong Kong and China Gas Company, Hang Seng Bank, Swire Properties, University of Hong Kong, Canon Hong Kong to adopt a no-shark-fin dining policy ( http://bit.ly/dtkHA1 ).  Hong Kong Observatory, and 180 primary and secondary schools also have made a similar pledge.

So what can the average person do to promote awareness around the damage shark finning causes our marine ecology? Beyond not consuming shark fin soup yourself, please do ask your companies and trading partners about their own policies.

It is urgent we act against waste and move consumption toward sustainable fisheries before it’s too late!

In asia, china water, Environment, Fish, Food, Hong Kong, Marine, water , , , , , , , , , ,
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Green Electronics? Not Quite Yet. And Where is Apple?

Lisa Genasci —  January 8, 2011 — 2 Comments

Greenpeace last week released the results of its third-annual green electronics survey – a look at how leading electronics manufacturers companies are doing. All but Apple and Phillips of the 21 companies contacted agreed to be ranked on three criteria; removing toxic substances, responsible take-back of their end-of-life products and energy efficiency.

The survey was motivated by the fact that throughout a product’s lifecycle – from material extraction to production, and from consumer use to disposal – electronic products have the potential to impact human health and the environment through the release of dangerous substances and energy consumption.

China is the world center for processing IT products and that country’s environment is paying the price. Printed Circuit Board and battery power production especially create heavy metal pollution.

Part of the problem is consumer demand for cheap products that don’t reflect the true cost of production – they don’t reflect the toll on the environment, on public and worker health.

Furthermore, IT companies continue to produce goods that have obsolescence built in, which means we consume endlessly looking for the newest or better product, boosting company revenues but at huge environmental and social cost, that, again, is not reflected in the price we pay.

The Greenpeace survey found a general improvement in green features compared to the previous two surveys in 2008 and 2007, including a significant decrease in use of hazardous chemicals and almost all products met or exceeded energy efficiency standards.

But lifecycle management was still the weakest point, with very little use of recycled plastic, varying take-back practices and few marketing efforts to prevent fast obsolescence of products.

Generally, also, Greenpeace found that electronics companies were becoming more transparent in the amount and type of product information provided to customers, often listing product’s chemical make-up and performance details.

Apple and Philips, however, once again refused to disclose any information to Greenpeace. Of course this reluctance to provide information is disappointing and not limited to probing by Greenpeace.

Beijing-based IPE, led by environmental activist Ma Jun, has also over the past year focused on the IT sector for its significant contribution to environmental degradation in China.

IPE has also contacted electronics companies about environmental violations and Apple is among those refusing to address questions about noxious emissions by factories producing its products.

Writing in a Guardian blog earlier last year, Ma Jun said 34 Chinese environmental organizations, including Friends of Nature, the Institute of Public and Environmental Affairs, and Green Beagle, questioned heavy metal pollution produced by companies in Apple’s supply chain in a letter sent to CEO Steve Jobs. Last week Ma Jun said that the only response from Apple has been a demand for proof that the polluting factories are producing electronics for Apple.

“The links between these companies and Apple are clearly established,” Ma Jun said last week. “We are working now to provide the company with hard evidence. Their unwillingness to release information about their production processes reminds me of Nike in the 1990s,”

By contrast, in an interview with Asia Water Project last year Ma Jun praised Hewlett Packard and Samsung for duck disclosure and movement toward greener products. Indeed, HP and Samsung were among the companies singled out in the Greenpeace survey for the producing some of the greenest products.

Why single out Apple, as IPE has done? Does a company with a solid reputation for being on top of its game, for producing innovative, quality and well-designed products, have a responsibility to manufacture without excessive environmental and social cost? Shouldn’t Apple be a leader also in its production processes and not a laggard?  Should we as consumers not demand more from the companies that sell us our products?

Fortunately, consumers ARE beginning to taking note. Companies that fail to adapt are poised to suffer huge reputational and revenue losses as a consequence.  A game-changing opportunity awaits those companies that choose to meet this challenge.

In air pollution, asia, carbon, china water, Environment, health, Hong Kong, Philanthropy, pollution, water , , , , , , , , ,
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Impact Investing as an Asset Class

Lisa Genasci —  December 5, 2010 — 1 Comment

 

The world’s problems are too vast for philanthropy or governments alone to solve. The US$300 billion spent by U.S. philanthropists last year is just not enough to make a significant dent, while foreign aid represents less than 1 percent of global gross domestic product.

The reality is that only by harnessing the markets, large-scale private and institutional capital, will we even begin to meet the challenges posed by massive population growth, meet our many needs, address issues around water scarcity, our depleted resources as well as our polluted air and water.

Philanthropy can help spur innovation, it can be used as risk capital, to develop models for social benefit that can then be scaled. Governments can help take that innovation to scale but they can’t do it all. Only markets have the potential to bring about real change at the scale and speed we need that to happen.

In other words, we urgently need to take social investments out of the realm of just doing good and plant them firmly in business models in order to make our world fit for our children and grandchildren.

But how does that happen?

A new report released last week by J.P. Morgan and the Rockefeller Foundation in partnership with the Global Impact Investing Network  (GIIN) attempts to advance this discussion.

The report argues that impact investments are emerging as an alternative asset class, thus allowing the sector to be considered alongside any other as part of an investment portfolio.  Impact investments in this instance are defined as investments intended to create positive impact beyond, although not to the exclusion of, a financial return.

“With increasing numbers of investors rejecting the notion that they face a binary choice between investing for maximum risk-adjusted returns or donating for social purpose, the impact investment market is now at a significant turning point as it enters the mainstream, ” the report states.

It addresses questions such as what defines and differentiates impact investments, who is involved in the market and how they allocate capital. Also considered is what makes impact investment an emerging asset class, how much return investors are expecting and receiving,  how large is the potential opportunity for investment in this market and what does risk management and social monitoring involve?

The report analyzes five sectors that serve bottom-of-the-pyramid populations (the global population earning less than US$3,000 annually): Urban affordable housing, rural access to clean water, maternal health, primary education, and microfinance.

For just these segments of the impact investing universe, the report identifies a potential profit opportunity of between $183 and $667 billion as well as  investment opportunity between $400 billion and $1 trillion over the next decade.

Many impact investments will take the form of private equity or debt investments, the report says, while other instruments can include guarantees or deposits.  Publicly listed impact investments do exist, although as a small proportion of transactions.

B-Lab differentiates Impact Investing and Socially Responsible Investing, which has been around for some time, defining SRI (estimated at $2.7 trillion in 2007) as primarily negative screening, or investment in screened public equity funds that avoid so-called ‘sin stocks’ or seek to influence corporate behavior.

The core of the II asset class is that the model of the business (which could be a fund management firm or a company) into which the investment is made should be designed with the intent to achieve positive social or environmental impact, and this should be explicitly specified in company documents.

There are a handful of investment funds established to finance businesses that address social problems, especially in the developing world. Examples of funds working in these space include Acumen Fund, Root Capital, E+Co and IGNIA, among others.

A significant challenge identified in making impact investments is sourcing transactions. Many impact investment recipients are small companies and the majority of deal sizes analyzed from our investor survey are less than US$1m.

Particularly for investors based in different regions, the costs of due diligence on these investments can often challenge the economics of making such small investments.

Another, of course, would be setting the reporting standards needed to establish just what constitutes a social or environmental return on an investment. This is something on which GIIN and B-Lab are working hard.

It’s great to see a mainstream financial institution dipping into this discussion.

Last week,  I participated in a panel discussion at INSEAD, Singapore on impact investing and many of the points above were discussed at length. In particular, we spoke of the  challenges of II in a developing world context where this is urgently needed.

In air pollution, asia, carbon, china water, Environment, forests, impact investment, Microlending, Philanthropy, pollution, social enterprise, water , , , , , , , , , , ,
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Philanthropy and Climate Change

Lisa Genasci —  November 16, 2010 — 3 Comments

 

We recently hosted a forum with the Asia Foundation on Philanthropy and Climate change.  We hoped to encourage Asian funders to draw the lines between climate change (something that seems often hard for the individual to grasp) and the more tangible and immediate air pollution, forestry degradation, water scarcity etc.

We also hoped to then get them to think beyond the environment to a wider philanthropic portfolio and to consider the impact of climate change on livelihoods, health, education – even how funders in the arts might get involved to build awareness around the need to act.

Why? We feel that given the enormity of the problem, it’s often hard for the individual funder, the family office foundation, to see how they might act in any way that is impactful.

But what we found was remarkable energy in the room. Rather than despair, we felt that participants left informed and energized by our panelists and keynote speaker, Stephen Heintz of Rockefeller Brothers Fund, which has an excellent environment and health, southern China program, managed by Shenyu Belsky.

Dr. James Hansen, one of the world’s leading climate scientists and head of the New York’s NASA Goddard Institute for Space Studies, provided an overview of climate science – setting the scene for discussion. Dr. Hansen, an advocate for a carbon tax, spoke of our inertia in the face of an emergency, the possible extermination of species, receding glaciers, bleaching of coral reefs, acidification of the ocean, basically that we are a planet out of balance.

Heintz also spoke about urgency, describing climate change as a “planetary threat that knows no bounds.” He emphasized the particular threat in Asia – that of 16 countries facing extreme risk, five are in in this region and they are among the most impacted, low-lying Bangladesh for example.

In all, he said, global warming could cost southeast Asia 6-7 percent of GDP. Clearly, Asia is squarely at the intersection of climate and development and he emphasized the need for new ideas and new ways of thinking, something that accurately reflects current realities and anticipates new needs.

It is easy, Heintz pointed out, to be discouraged by the science, yet philanthropy, government, civil society and the private sector all have roles to play. In reality , it is imperative that we act because, inevitably, climate change will impact every other issue that we are working on.

Global grant-making, Heintz said, has increased dramatically over the past decade yet environmental issues are way behind, receiving only 5 percent of funding. Resources targeting climate change specifically, of course, are far less.

The philanthropy sector, Heintz said, can play a crucial catalytic role, take risk, experiment, support advocacy to change public policy and trigger larger systemic change. Important will be innovative public-private partnerships, helping to develop emerging models of low-carbon prosperity. His was an excellent speech.

Our three panelists, Runa Kahn of Bangladesh’s Friendship, Dorjee Sun of Carbon Conservation and John Liu, an environmental filmmaker and journalist based in Beijing, spoke of the practicalities of working effectively within this context – and they also were inspiring.

Runa spoke about making life possible for the 4 million people living  in impossible circumstances in Bangladesh’s northern chars, John Liu on a massive ecological restoration project in China and showed the results, Dorjee on carbon, community and market solutions for saving forests.

The entire session was expertly moderated by the Asia Business Council’s Mark Clifford who managed to draw together the discussion, keeping an often amorphous and difficult topic moving toward practical solutions and away from fear.

The forum was a private side event to the C40 Climate change conference early this month organized by the Civic Exchange and supported by the Hong Kong government and Jockey Club Charities Trust.

It would be great to hear about other experiences linking climate change with a wider philanthropic portfolio, about nudging funders into action in this arena.

In air pollution, asia, carbon, children at risk, china water, Environment, Fish, forests, health, Hong Kong, indonesia conservation, Marine, Philanthropy, pollution, redd, social enterprise, Uncategorized, water , , , , , , , , , , , , , , ,
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Environmental Damage Costs 11 Percent Global GDP

Lisa Genasci —  October 10, 2010 — Leave a comment

Global environmental damage from human activity cost the world US$6.6 trillion last year, according to a new UN study.

That amounts to 11 percent of global GDP and amounts to 20 percent more than the US$5.4 trillion decline in the value of pension funds in developed countries caused by the global financial crisis in 2007/8.

The study, by UN-backed Principles for Responsible Investment (PRI) and UNEP Finance Initiative, estimates that the world’s top 3,000 public companies were responsible for one-third of the damage, or US$2.15 trillion.

Other takeaways from the study:

  • Environmental harm could affect significantly the value of capital markets and global economic growth
  • Global environmental damage is estimated to cost $28 trillion by 2050

Why should investors care? The study warns that as environmental damage and resource depletion increases, governments will start applying a more vigorous“polluter pays” principle.

That means the value of large portfolios will be affected through higher insurance premiums on companies, taxes, inflated input prices and the price tags for clean-ups.

As a result, workers and retirees could see lower  pension payments from funds invested in companies exposed to environmental costs, says the study, conducted by Trucost, the global environmental research company.

Sectors most responsible for the damage, including air and water pollution, general waste, resource depletion and greenhouse emissions, included: Utilities; oil and gas producers; and industrial metals and mining. Those three accounted for almost a trillion dollars’ worth of environmental harm in 2008.

Why are investors still not providing leadership on this? Clearly, environmental externalities generated by one company have the potential to affect their portfolio. There is every incentive.

Already in China, low estimates are that Water scarcity and pollution alone represent 2.3 percent of that country’s GDP, according to the Asia Water Project. And China has said that, overall, environmental pollution costs the country 10 percent of GDP annually.

A sustainable global economy means we MUST stop drawing down our natural capital.

 

 

In air pollution, asia, carbon, china water, Environment, forests, health, pollution, water
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