Archives For November 30, 1999
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.
Musahars are among the most discriminated communities in India, a problem I have written about here: https://genascihk.com/2011/04/03/292/. This is a video made for Sister Sudha and the fantastic community of girls she is helping to educate.
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.
Orangutans inhabiting an Aceh protected peat forest surrounded by oil palm concessions are at risk of being completely wiped out by the end of this year if fires set to clear the land aren’t stopped, according to conservationists in Indonesia.
Ian Singleton of the Sumatran Orangutan Conservation Program (SOCP) said that only about 200 of the 3,000 Orangutans living in the Tripa forest in the early 1990s remain. In all, only an estimated 6,600 Sumatran Orangutans are left anywhere in the wild, he said.
This has come as the pace of burning in the Tripa Peat swamps has accelerated in the past few weeks, possibly as palm oil companies take advantage of Aceh’s uncertain current status under an “interim” Governor, conservationists said.
The real concern is that at the current pace of destruction there will be no remaining High Conservation Value Forest and no more protected wildlife in the area by the end of 2012.
Graham Usher of the Foundation for a Sustainable Ecosystem said that only 12,000 of the original 60,000-hectare forest remains. Much of the forest is now highly fragmented, with the largest remaining block measuring less than 8,400 hectares and only one other fragment over 1,000 hectares.
Any orangutans trapped in the remaining small fragments of forest amid the burning are now effectively refugees of forest that no longer exists and are likely to die from starvation if not killed or captured.
Just in recent months, Usher told a Jakarta press conference, at least 100 Orangutans have been killed, while an additional 100 died between 2009 and 2011 in the process of conversion of the palm oil concessions or from starvation.
According to Usher, over 100 fire hot spots were recorded between 19 and 25 March among the area’s palm oil plantations.This is apparently perhaps the worst burning since satellite monitoring of Indonesia’s fire hot spots began in late 2000.
A number of the fire hotspots were coming from an apparently illegal palm oil concession, considered by many in breach of Indonesia’s moratorium on clearing forest.
The PT Kallista Alam concession permit was, according to the conservationists, issued three months after the government’s moratorium map was issued. There is currently an ongoing legal case in Aceh concerning the same concession in which a decision is expected April 3rd.
This suit alleges that the concession was clearly issued inside the Leuser Ecosystem, which is designated a National Strategic Area for Environmental Protection in Indonesia’s National Spatial Plan, established in 2008 under Government regulation 26.
Conservationists also say that forest clearing and drainage canal construction began in the concession even before the permit was issued, that the permit was issued while the concession was clearly shown as off-limits to any new plantations under the President’s official map establishing a moratorium on new permits.
The request was made Thursday for the government immediately to order all oil palm companies with concessions within the Tripa Peat Swamps in the Leuser Ecosystem to immediately cease all land clearing and burning.
In addition, it was suggested that the government of Norway immediately suspend the 2010 bilateral letter of intent that was the basis of the moratorium until the burning has been thoroughly investigated.
By far the most fire hotspots, however, were located in the PT Surya Panen Subur 2 Concession, a 13,000 hectare palm oil concession that formerly belonged to PT Astra Agro Lestari, in which Hong Kong-based Jardines owns a majority stake.
That was purchased by Astra Agro Lestari in 2007 and then sold to Triputra Group, founded by a former CEO of Astra, according to SOCP, in late 2010, following heavy criticism of Jardines connection to the concession in international press reports.
Why would Jardines want any association with a palm oil concession located in a protected area and, indeed, why would the company then turn around and sell that under pressure to a loose associate rather than set it aside for conservation?
That coveted bowl of shark fin soup, those shark cartilage capsules said to bring health benefits, might not only be bad for the oceans but also pose a risk for degenerative brain disease in humans.
A new study from University of Miami researchers shows shark fin contains high concentrations of a neurotoxin linked to neurodegenerative diseases including Alzheimer’s and Lou Gehrig’s disease (also Amyotrophic lateral sclerosis, ALS).
The findings, published in the journal Marine Drugs, followed the testing of seven species of shark: blacknose, blacktip, bonnethead, bull, great hammerhead, lemon, and nurse sharks for β-N-Methylamino-L-alanine, or BMAA. Samples were collected as fin clips from live shark in South Florida waters.
The study’s co-author, Professor Deborah Mash, director of the University of Miami Brain Endowment Bank, was part of a 2009 study that showed patients diagnosed with Alzheimer’s Disease and ALS had unusually high levels of BMAA in their brains of up to 256 ng/mg. By contrast, healthy people, the study showed, had no BMAA, or only trace quantities of the toxin in their bodies.
In this latest study, the team found high BMAA levels of between 144 and 1836 ng/mg in shark fins.
BMAA is produced by cyanobacteria, which are found in lakes, rivers, estuaries, and marine waters where nutrient loading from agricultural and industrial runoff, sewage, groundwater inflow and atmospheric pollution accelerate bloom growth.
This is then eaten by small aquatic marine animals, which in turn are consumed by sharks, potentially posing a health risk to consumers of shark products.
The study cautioned that, “further studies are needed to confirm this finding and to demonstrate that widespread BMAA detections in sharks may occur outside of South Florida coastal waters.”
High concentrations of BMAA were, however, detected in the fins of some sharks collected in areas with no active cyanobacteria blooms. Sharks are highly migratory, making it likely that they pass in and out of areas where cyanoblooms may have occurred over time, the study says.
Consumers in Asia eat shark fin soup at wedding or official banquets and purchase shark fin cartilage powder or capsules as dietary supplements, which claim to combat and/or prevent a variety of illnesses.
However, the study points out that, “the benefits of these supplements have not been significantly proven, nor has shark cartilage been reviewed by the US Food and Drug Administration.
Let’s hope regular consumers of shark products think carefully about their health before slurping down another bowl of shark fin soup or popping more cartilage capsules.
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.
We have been thinking a lot about Social Impact bonds and how the concept might apply to conservation finance, which is something about which we ponder a great deal.
Why not a Forest Impact Bond, issued against promised aid streams from sovereign development banks wanting to mitigate climate change and/or promote forest conservation?
These could work in circumstances where communities are key to protecting High Conservation Value forest.
FIBs would be focused on impact-driven community development (schools, livelihoods, health, education) but linked also to real conservation outcomes.
Time is slipping as we try to establish the best way to protect ourselves at scale from climate change, manage and protect our forests for future generations.
The multiple challenges around forest conservation is something we’ve written about previously in this blog here and here.
In essence, the problem is how to compensate governments and landholders for the huge rewards they reap cutting trees from native tropical forests; how to balance development with conservation.
Since 57 percent of the world’s forests are located in developing countries, it is hard to make the economic argument that these areas should not be developed for the benefit of the national population. Indeed, timber revenues represent the major, sometimes only, export commodity of a country.
The Commission on Climate and Tropical Forests has estimated that 17 percent of greenhouse gas emissions – an amount equal to the transportation sector – are from deforestation.
At the same time, the scale of financing required to halve deforestation will reach US$30 billion annually by 2020, the U.S.-based commission estimated in the same report.
Only turning to the global capital markets will provide sufficient funding to meet the challenge deforestation presents today. That strategy could include the use of bonds, which would allow the desperately needed investment at scale.
Communities and Livelihoods the Key to Conservation
Key to this discussion is that not only do governments and landholders need to be compensated for not chopping forests for timber, but local livelihoods are also often linked to forests.
Nearly 90 percent of the 1.2 billion people living in extreme poverty worldwide depend on forests, which provide them with building materials, food, coffee, cocoa, medicinal plants and income from other sources.
Without access to the forests not only do many of these people lose livelihoods but they also may lose their crops to droughts or floods as climates change with deforestation.
Thus communities living in and around forested areas are key to their protection.
Still, even with access to forests, local populations who face the immediate need of supporting their families often don’t recognize the value of conserving forests for the longer term because they cannot meet their immediate needs for food, housing, clothing and education, among others.
Thus, local communities need both education on the value of long-term forest conservation to their own lives (livelihoods, water etc) and help establishing alternative and sustainable income sources.
At the same time, battling to defeat poverty, poor nations argue they cannot be expected to forfeit income from economic activities that lead to deforestation, particularly since there are global benefits from developing world forest services – carbon, water etc.
They have argued collectively that if global powers want to preserve the rainforests and their natural services provided then those must be paid for.
Rainforest Bonds Not a New Conversation
Indeed, for many years now there has been talk of rainforest bonds, which would help pay the large upfront capital expenditure required to invest in development, livelihoods, conservation to maintain the forests.
Under conventional thought, either forest carbon revenue or other sources of income such those generated by sustainable timber, agriculture or ecosystem service markets (water, biodiversity for example,) would repay investors.
But the conversation around REDD carbon has stalled with regulatory uncertainty. Additionally, in Asia certainly, we are a long way from any scalable ecosystem markets, while the significant upfront investment needed to promote agriculture as an alternative or to build local livelihoods to protect forests is just not available philanthropically.
And that’s just it…the bond conversation has gone on for years with significant players like the Prince’s Rainforest Trust and others eventually pulling back given the difficulties in identifying revenue streams that would work.
Turning to Forest Impact Bonds
So why not step back entirely from the conversation around how to make forests pay and look instead to the large sums promised by sovereign development banks at Copenhagen (US$4.5 billion) and other aid that has yet to find a home for want of knowledge of how to invest those funds with surety and with impact.
And that’s not surprising. Over the past two decades, substantial funds have flooded into Indonesian conservation (usually to secure national parks or protect wildlife and its habitat) without corresponding transformational change. Over the same period, deforestation has only accelerated, fueled by burgeoning consumption, population explosion and massive urbanization.
So the problem remains, how to ensure that limited funding for conservation is spent with measurable and significant impact? How to balance development and conservation and raise the funds from global capital markets to pay for both?
Indeed, we must increase the availability of performance-linked finance to protect forests for local communities and local governments, in order to maintain them for global biodiversity and as carbon sinks.
In 2007, a similar discussion emerged in the UK around improving social outcomes and reducing uncertainty of funding for social services.
Shortly thereafter, London-based Social Finance introduced the concept of social impact bonds, which target funds to specific projects with measurable results.
If the identified targets are reached, the UK government saves on social programs and those savings are used to repay bond investors, in certain cases with interest. If targets are not reached, bond investors lose out as they would in any junk bond investment.
Turning to the U.S, in last year’s budget speech, President Obama announced that he had set aside US$100 million for social impact bonds and at the same time two Boston-based companies have recently been established to apply the UK social impact bond concept to the U.S. context.
Why could this innovative approach to generating social impact in the UK and the U.S. not work also to protect forests in Indonesia, targeting communities and livelihoods but at the same time generating extra and measurable impact in conservation?
Given the argument above, and the lack of current appetite for REDD+ and other forms of eco-securitisation backed by forest assets or credits, might we then apply the social impact bond example to community development initiatives in a country like Indonesia?
In this scenario, international government funds, funds from multi-laterals with an interest in combating climate change and conserving forests for future generations pool funds in an SPV that are then allocated to community development initiatives with specific parameters and measures of impact.
The key would be to persuade the local government to join what would essentially be billed as a development initiative but with additional conservation benefits.
The SPV funds would be available to repay investors in the event that the community development programs, livelihood initiatives, the conservation targets achieve desired results. In this way, the pooled funds are used only if they have been effective and only after impact has been achieved and quantified.
Country funds would likely have to be established separately, with their own fund administrators (local country officials?) and project monitors.
An initial pilot would likely include just one country – Indonesia perhaps – and one specific target: perhaps livelihoods and education around several conservation areas.
For in-country implementing partners we could draw on local NGOs to support conservation (research and protection) and identify appropriate targets. Microfinance institutions could support business initiatives where appropriate and rural development organizations would help build agricultural businesses that local communities in Indonesia want to generate income.
Legal organisations would need to be employed to help sort out land-titling to establish a legal basis to land ownership. Education NGOs could be employed to boost local knowledge around conservation, while healthcare providers could support rural health development.
This would then be associated by local communities, along with improved education, for example, with conservation of their local forests.
So rather than trying to pry an uncertain financial return out of forest services or REDD+ (although if these markets develop in the future, certainly these could be added to SPV funds) we are trying to achieve only effective allocation of government/multilateral resources and measurable impact.
At the same time, however, there could be a return on investor depending on the effectiveness of the programs., while a tranche structure with different risk/return profiles could be used to simultaneously appeal to both groups.
The difference with the UK Social Impact Bond, of course, would be the potential for shared savings. Although it would be important to have local governments as key participants, it is unlikely their own development investments would make this worthwhile.
Who would buy Forest Impact Bonds?
There is growing interest on the part of institutional investors in markets where there are environmental and social as well as financial returns or where there are at least screens for negative impact.
According to Eurosif, total SRI assets under management increased dramatically from €2.7 trillion to €5 trillion, as of December 31, 2009. This represents spectacular growth of about 87% since 2007.
The sense is that when environmental social and governance issues start to affect share price or impact bottom lines boardrooms will take note.
Increasingly, SRI is a mainstream criterion in equity analysis and several stock exchanges have launched tradable indices that track SRI companies or ESG alongside financial performance. And ratings agencies are emerging to rank companies on their ESG performance.
At the same time, part of the consideration around forests is that they have long carried appeal to institutional investors.
According to an article in The Banker from 2007, more than US$30 billion globally is invested in forest assets, although mostly through funds and largely in the US.
These investments generally offer competitive returns with low or negative correlation to traditional asset classes making them a counter-cyclical hedge.
In Summary…
- A FIB is a contract with the public sector in which it commits to pay for improved environmental and social outcomes
- On the back of this contract, investment is raised from investors motivated perhaps not only by commercial but also by environmental and social returns.
- This investment is used to pay for a range of social outcomes such as poverty alleviation of local communities, improved health and education, all tied to and contingent on conservation of an area of high-conservation value local forest
- The financial returns investors receive are dependent on the degree to which outcomes improve i.e, they may receive part or all of the initial investment back, and in some cases additional financial returns.
- A FIB shifts emphasis from paying for inputs and outputs to paying for impacts
- In its purest form, a FIB has a risk profile more similar to an equity investment than a debt investment
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.
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.
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.
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?
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.
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?
We recently spent time in Northern Sulawesi with Dr. Lynn Clayton at Nantu, which is the 62,000 hectare forest conservation area that the Oxford-edcuated biologist has worked effectively to protect from loggers and poachers over the past 20 years.
I was struck by the incredible size of the trees, the quantity of unusual birds, the general force of nature and indeed the privilege of spending time in such an untouched environment.
Separated from varied threats by a team of rangers who protect trees with trunks the width of houses, the endemic species, the babirusa and anoa among others, Nantu truly is like another world, a parallel and agreeable universe that is largely free of any human footprint.
Immediately evident is the interconnectedness of the forest – the trees, the plant life, the soil, the wildlife, the rain that cascades in waterfalls, that each facet of life adapts to meet its own needs, adjusting for self-preservation.
Also noticeably absent in this harmonious environment: evidence of humans. The footpaths along the perimeter and to a blind for watching babirusa at a salt lick, the ranger stations, a community of gold miners deep within the forest, are the only apparent confirmation that humans are part of this forested world.
The opposite side of the Nantu river is where the local communities have established themselves – many of them brought in as a result of the government’s transmigration program, designed to move landless people from densely populated areas to less populous parts of the country. This tells another different story: Kilometers of denuded land, the occasional lone tree, fields of wheat and a few other crops.
Still, when crops fail in these areas, inhabitants are forced to look for alternative income and that, most recently, has involved illegal gold mining inside Nantu or rattan collecting for local officials interested in seizing control of the protected area and its precious assets for their own benefit.
Clearly we need to preserve natural environments, which exist as lungs for the world, as repositories of biodiversity and as guardians of the watershed for local communities. But we also need to consider the need of communities to generate income to feed their families, to live decent, rural lives.
Although carbon REDD (reduced emissions from degradation and deforestation) in the future may become part of the puzzle, paying communities to help protect forests and the cost of conservation, that is not the only answer.
Generating livelihoods for communities and building businesses that help pay for conservation must also be part of the solution. Dr. Clayton has been working with local families to plant cocoa and build livelihoods. So far about 100 families have received saplings over the years and many are now deriving income from their crops.
But even that is a balance. How to satisfy the local community and not attract others looking for similar rewards?
Are you building an interesting forestry conservation model that involves communities?
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 Beijing recently, environmental activist Wen Bo pointed out that if we are to save our planet, China is where we should be looking to act. Yet as he and others pointed out, there is no environmental movement to speak of there and funds spent to help stimulate action on climate change are small relative to those spent elsewhere. This despite greater openness from the Beijing government around environmental activism and their public recognition of the challenges the country faces.
A recent report from the Netherlands Environment Assessment Agency showed that the hefty increase in emissions from fast-developing parts of the world like China and India “completely nullified CO2 emission reductions in the industrialized world.”
The numbers are startling. According to a McKinsey Global Institute, by 2030 Chinese cities are expected to add more than 350 million people – more than the total population of the United States – swelling to a total urban population of more than a billion.
This will mean massive investments in housing, transportation, water and energy systems. Imagine all the additional consumers, many of whom will for the first time be buying air conditioners, refrigerators, cars, washing machines and the like. Then there will be the new hospitals, the school, universities, transport systems for new towns, expansion of the existing transports to accommodate urban sprawl. Finally, there are the apartment buildings and offices. All this will mean huge further consumption and demand on energy sources – 80 percent of which are coal today.
Already, 16 of the World’s most polluted cities are in China while desertification in some parts and flooding in others have taken their toll. The World Bank concludes that air and water pollution is costing China about 5.8 percent of its $4.9 trillion GDP in direct damage. This includes impact on crops of acid rain, medical bills, lost work from illness, money spent on disaster relief following floods and the implied costs of resource depletion.
With health costs escalating, that figure will increase, giving rise to some grim prognoses that growth itself will be undermined.
Recognizing this, Pan Yue, deputy head of China’s Ministry of Environmental Protection, the country’s environmental watchdog ministry (SEPA), has called pollution “the bottleneck constraining economic growth in China”.
We’ve been thinking a lot recently about how most people view philanthropy. We’ve been thinking that they view charitable giving as something intensely private, something that comes from goodwill, from the heart, something that ought not to be confused with the rest of life, with numbers, with market norms.
We’ve been thinking that many people don’t really want to focus on the tough issues, on the “why?” for philanthropy: That 3 billion people, almost half of our world’s population, lives in poverty on less than US$2.50 a day, that 1 billion people don’t have access to clean drinking water, that 24,000 children die daily from poverty.
And then beyond poverty, the environmental challenges we face from increasing temperatures and rising sea levels to disappearing forests, from dramatic declines in fish populations to loss of terrestrial biodiversity.
We’ve been thinking that maybe we genuinely don’t have time in our busy lives to focus on what’s happening in the developing world or even the next neighborhood over, or maybe we just don’t want to see for lack of solution. What can we do, after all but write that check and feel that we have done our part?
It is true, that poverty, water shortages and the myriad environmental challenges don’t yet directly impact most of our own lives, which are full enough of each day’s stress. So when it comes to philanthropy, to volunteering, we want to just enjoy the giving.
We prefer to contribute with emotion, with friends, regardless of the cause, without looking at numbers, statistics, without necessarily thinking about the end result. We want to give to what we know, what we assume will work, what we believe has always worked. We want the safe option, to be part of a community of people doing the right thing in the comfort of friends.
Understandable when we consider that the word philanthropy, loosely translates from its Greek roots as “love for humanity.”
But the reality is there is much more good work that could be done with the US$300 billion Americans give each year – an estimated 45 percent of world philanthropy. And the reality also is that to fix the damaged world our children will inherit, the poverty of our burgeoning world population, we must offer more than just “doing good” as an answer.
We must work against the sense of cross-purposes involved in thinking about the application of market norms to things social if we are to make the real and urgently needed change. We must pay attention to the issues to which we are giving and use our philanthropy wisely to ensure we are indeed part of the solution.
There is precedent for doing more. We can look into philanthropy’s not so distant past to see that the Rockefellers and Vanderbilts were as innovative as it came in their charitable works. And of course it was Andrew Carnegie who so famously recognized the need for smart philanthropy, warning that most charitable acts go awry.
At essence, the philanthropy sector must draw on all resources at its disposal to build codes and gather information on and publicize successful or failed practices, we must learn to harness markets more effectively, to innovate around business models that can bring the sweeping changes we so badly need. There needs to be more tolerance of risk with charitable dollars.
Of course some of this is already happening with the growth of venture philanthropy, micro-credit and social entrepreneurship, with new models of investing for social impact, but there needs to be more and faster.
How can we promote transformation, not just in the professional philanthropic sector, but also among donors, which in turn will fuel change among implementing non-profits? How can we transform the attention paid to short-term results into a more patient investing in our future?
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- Friendship’s Runa Khan
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- Boat is the only form of transport in the chars
I recently spent some days in Bangladesh with Friendship and the excellent social enterprise’s executive director, Runa Khan. Friendship works with tens of thousands of the world’s most-vulnerable people who live in the northern Chars, remote and shifting sandbar islands that flood in winter and suffer drought in the summer.
Located about seven hours from Dhaka, these must be some of the most inhospitable habitats anywhere and consequently life expectancy for the forgotten people is only late 40s. In the rains, the islands shrink to slips of land with a few banana trees, with inhabitants and their livestock often forced to rooftops to survive the floods. In the heat of summer, the walks to the villages are often as long as three kilometers from the river through unforgiving sand.
An estimated 4 million nomadic people inhabit the 200 islands woven through the Brahmaputra river where land flattens toward the Bay of Bengal. The sand dwellers migrate from one island to another as much as 50 times in a lifetime, carrying with them their tin houses in the floods.
Climate change is clearly felt in Bangladesh’s distant northern and equally distant southern regions, where Friendship is almost alone among NGOs in working. Government reach here is also limited, Khan says. The people used to at least have certainty about the weather patterns but now the rains and droughts are harder to predict and more extreme, she says.
Friendship started its work more than ten years ago providing health care to the communities on a specially outfitted hospital barge, brought from France by Khan’s now husband, French sailor Yves Marre. Now two hospital ships and an ambulance boat ply the Brahmauptra spending a month or two in each location, offering primary care at about US 10 cents for men, 5-7 cents for women and children as well as affordable basic surgery to the region’s weather-beaten inhabitants.
From medical care, Friendship has extended into education, (both for children and adults), livelihood and vocational support, working closely with communities to help them meet all their needs. With a staff of around 350, a complex schedule of foreign doctors and other medical professionals who fly in for specialized care, Friendship works with an estimated 40-50,000 people previously served mostly by microfinance providers, who often prayed on the extreme poverty.
Khan points out that although microfinance can work for people with at least some education and means of support, it is often not appropriate for the poorest, who will use any available funds simply to buy food for their families. Many lenders, she says, show up on the islands with offers of cash, promising interest rates of only 10 percent annually. Without knowledge of basic arithmetic, the people take the money, spend it and then must meet the payments that often add up to rates closer to 50 percent, she says. And these are some of the better microcredit institutions. Money lenders charge as much as 120 percent.
“When we first start working with a char one of the first things we must do is unwind the microfinance loans,” Khan says. “People at that level of poverty need grants and other forms of support not loans.”
Khan says that the char people more than anything need, “hope for tomorrow” and Friendship offers education where there were no schools, healthcare where there were no doctors, livelihoods where people had none, community organization where people were disperse and disaster preparedness where there wasn’t any. A focus is on discussion, trading information, and building savings to prepare for years where the floods or droughts are life-threatening or force a relocation.
Friendship is also working to create a harmonious environment in the stark landscapes, building appropriate and local farming techniques for sand, bringing in solar where they can – with an emphasis on keeping people in their places of birth. Without Friendship, many people from these regions have swelled the slums of Dhaka in search of work.
Schools can be disassembled in three hours and moved to higher ground, girls are taught weaving and dying – skills that help them contribute to the family income and avoid an early marriage (12-14 was the norm before Friendship arrived). Community health workers are trained and sent to the villages, where they teach local people about nutrition, sanitation, about warning signs in a pregnancy and basic child health techniques. They also can dispense basic medicines.
“We listen to the communities, hear their needs and respond in ways that are appropriate,” says Khan of Friendship, which is surely one of the more innovative organizations I have seen.
emilybotsford
sleclue
Rethinking Philanthropy (Lisa Genasci) 
