Ten Year-End Charts: Part 2
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Happy holidays, Green daily readers. We’re wrapping up the year with the second part of my 10 charts looking back at 2021. In part one, I highlighted how electric vehicles are now 10% of global passenger vehicle sales, up from 0.002% at the start of 2010. It’s a dramatic ramp-up in sales, with major implications for the millions of people working for motor vehicle dealers and parts suppliers (2 million of whom are in the U.S. alone).
EVs have far fewer moving parts than their internal combustion engine counterparts, and require less servicing over their lifetime – the sort of servicing on which dealers and parts suppliers make a good deal of their revenue.
Fossil Fuel Support: More Than Just Fuel Subsidies
In 2015, the countries of the G-20 provided $706 billion of support to coal, oil, gas, and fossil-fueled power generation. Five years later, that figure had fallen, but only slightly, to $636 billion.
Most people will imagine that fossil-fuel financial support takes the form of direct subsidies to energy prices, such as below-cost electricity and gasoline. G-20 countries do indeed provide some of that, but it only accounts for about a fifth of that $636 billion. The bulk of it comes in the form of support for state-owned enterprises, which both produce and consume fossil fuels. That support has the potential to lock in assets, and the commercial behaviors that go with them, for decades.
Talking the Sustainability Talk
In the past year, diversified banks have made a number of statements about their climate change and sustainable investment activity, with a few of them planning to zero out the emissions from their financing activities by mid-century. There aren’t very many of them — Bloomberg tracks only 22 with market capitalization greater than $10 billion as of the end of last year — and they’re quite a stable cohort.
It is also worth listening to what they say as well. Last year, every one of them mentioned ‘sustainability’ in their regulatory filings, presentations, and earnings call transcripts, and almost all of them said something about climate change, too.
Mentioning these terms is, if not exactly costless, then at least not particularly costly. Turning those words into action over the coming decades is by far the harder part. It’s now incumbent upon all of us — as institutions, politicians and policymakers, fiduciaries, and individuals — to ensure that the big banks carry out what they’ve promised. A chief executive’s stated strategy on climate should be measured in every board meeting. Institutional investors should make it one of their queries in every shareholder gathering. Leaders should be noted, and laggards — just as importantly — should be called out, too.
The War for ESG talent
Earlier this year, Bloomberg Green’s Tim Quinson highlighted research from Tensie Whelan, a professor at New York University’s Stern School of Business, on how few corporate board members have a background in environmental, social, and/or governance subjects. I read Whelan’s paper again this summer specifically for environmental expertise, and the data are pretty grim. As of April 2018, 5% of the nearly 1,200 board members of Fortune 100 companies had experience with workplace diversity, and 2.6% had experience with accounting oversight. Barely 1% had any experience with energy or conservation, the two highest-ranked categories in Whelan’s study. Three-tenths of a percent of the Fortune 100’s board members had experience with ESG investing; 0.2% had experience with climate.
Corporate boards should probably gain some client fluency, and soon. If it happens, it will be a culture shift for the world’s corporate giants. That’s a big if, though, because it will almost certainly mean bringing in new board members. These will very likely wind up being younger, more academic, more entrepreneurial, and more experienced with what did and did not work in the last wave of early-stage climate technology than the grandees, semi-retired business leaders, or otherwise noteworthy senior figures that pack today’s boardrooms. That’s going to be a challenge. Boards don’t generally include 40-year-old climate scientists because they don’t generally include many 40 year-olds, period—or many scientists, for that matter.
Underestimating the Short-Term , Overestimating the Long -Term
The energy sector loves its long-term forecasts, and for good reason: assets have long financial and technological lives, they can cost billions of dollars, and they take years or decades to build. I like reading them, and the older the better. This summer I picked up the first volume of the United Nations’ 1956 10-volume opus, Proceedings of the International Conference on the Peaceful Uses of Atomic Energy. It is not actually the nuclear aspect that interests me — rather, it is the vision of what electricity demand would look like in 1975 and 2000.
Writing more than six decades ago, the UN slightly underestimated actual electricity demand in 1975, and significantly overestimated demand in 2000.
Re-reading old studies like this is an exercise in questioning one’s contemporary priors. I hesitate to think of what a group of mid-1950s scientists and bureaucrats would imagine about electricity demand in 2020, but “India will generate more power than the entire world today and China will generate seven times more, at the same time that global electricity demand growth will be less than half what it is now” is probably not it.
Bonus: Your best-read of 2021
I am delighted to say that the column Green Daily readers took to the most in 2021 was also one of my very favorites: a review of satire site The Sunion’s funny, sometimes-painful, always-observant take on the renewable energy project development business. Happy reading to all!
Nathaniel Bullard is BloombergNEF's Chief Content Officer.
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