EDITORIAL

Fires ravaged across several continents this summer, and 16 million hectares of land went up in smoke in Canada alone, in mega-fires whose risk was considerably increased by climate change, also illustrated by a record temperature globally this July. On the water front, the consequences are amplifying, with a quarter of humanity now living in countries exposed to extreme water stress.

At the same time, fossil fuel subsidies have reached new records, with 7,000 billion dollars by 2022, or more than 7% of global GDP... According to the International Energy Agency, new records were set for the volume of oil demanded in June-July, and could further increase later this year. 

Illogical? Absurd? Certainly. But turning to stupefaction won't solve anything: a significant proportion of the population denies the reality of climate change and/or its Anthropogenic originis - and the same goes for economic players, and probably for economic and political decision-makers as well, when it is not a question of merely opportunistic stances. It is a reality we have to come to terms with.

Consider, for example, the endless debates in the USA on the "ideological prism" of integrating ESG criteria into investment decisions. Of course, the ESG approach is not a cure-all. However, the result is that many players, such as Blackrock, are playing the avoidance and disengagement game, and are now refusing to use the term ESG, but are also backing away from voting on sustainable resolutions at AGMs. This avoidance won't resolve the differences, let alone the underlying economic, social and environmental issues - all potential impacts and long-term risks that fiduciary responsibility should not obscure. In any case, meanwhile, the forests continue to burn... 

On a more macro level, according to the SDG Progress Report, only 12% of the Sustainable Development Goals are making sufficient progress to achieve the 2030 Agenda objectives, while progress is considered weak for more than half of these goals, and neutral or even negative in compared to 2015 for 30% of them. Faced with this reality, the motto shared by the Secretary General of the United Nations at the High-Level Political Forum on Sustainable Development was as follows: financing is more than ever at the heart of the system, and is a key driver in the face of the "financial abyss” encountered in many regions. 

Rising interest rates are complicating the reallocation process. Real estate markets, particularly in China, but also in the USA and Europe, are starting to seize up, and such problems have not (yet) really hit the equity markets. It is therefore imperative to take advantage of this window of opportunity, which is still open, to partially maintain asset values and redirect assets under management towards activities with a profound and lasting impact, the main guarantee of resilience and legitimacy in the future.

But to achieve this, we need to build credible projects and forge new types of partnerships. 

There are several parallel paths to follow:

• The transformation of existing activities, organizations and assets is necessary and inevitable: the emergence of new business models does not make this transformation of existing assets any less necessary, with a view to making the best use of resources. It requires an in-depth analysis, a rethinking of what has been achieved, harmonization from top down in light of the regulatory context, and prioritization of projects, for example by moving away from fossil fuels in industry or reshuffling the social cards in private equity investments.
• Innovation, building new ecosystems and creating new solutions and models 
•  And above all, establishing new forms of coalitions between corporates, investors, civil society, public players and innovative organizations to bring these two parallels together.

This is what Ksapa and its global ecosystem of partners works on every day. Get in touch to discuss more!         

Raphael Hara,
Managing Director