The Green Recovery Edition I Trinity Term 2021

The Oxford Strategy Review

Welcome to the OSR

“We want to bring the best of Oxford thinking to the most pressing questions in corporate strategy, international affairs, the global economy, and to the future challenges we all face.”

oday, more than ever, the world around us presents both immense opportunities and T incredible challenges. Recent experience, from the global financial crisis to the coronavirus pandemic, has demonstrated that adapting to this evolving reality requires initiatives that bring together governments, business, and institutions from across civil society in support of the common good.

We’ve been inspired, in the course of this pandemic, by the incredible work done to develop and deliver a vaccine for the world. That started with ideas generated by a small team at Oxford, funded by research organisations, supported by governments, tested with the support of volunteers and charities, and delivered in partnership with companies from across the world. We’re sure that more can be done to generate ideas and discussion which connect these traditionally distinct spheres, with institutions like Oxford ideally placed to play an important role in that conversation.

The Oxford Strategy Review is a new, student-led journal which will bring the best of Oxford thinking to the most pressing questions in corporate strategy, international affairs, the global economy, and the future challenges we all face. The OSR is run by Oxford students, and publishes contributions from the student body, researchers, alumni and others associated with the university. Our editorial team is drawn from across the university, including undergraduates reading for degrees in Philosophy, Politics and Economics, and graduates at our schools of Business and of Government. Our audience is global, reaching out to all those with an interest in these topics – in business, within government, across academia, and in organisations and institutions across civic society.

We and our contributors address questions across four areas of challenge and opportunity – on corporate strategy, international affairs, the global economy, and a wide range of future challenges. On corporate strategy, we focus on fundamental forces and how corporates, institutions and governments are responding to them. On international affairs, we lead with analysis of the leading challenges in global politics, governance, security, and international relations. On the global economy, we address emerging trends and disruptions in global economics, trade, and technology. And on future challenges, we tackle the multiple threats and opportunities faced by governments, corporations and institutions, and the potential solutions they might adopt. Our team will look to address topics in each of these areas, and at their intersections, looking for new ideas which reach across different fields.

We’d like you to play a part in all of this as well – by engaging with us on these topics, by contributing content, and by helping us to reach out to our growing audience around the world. Welcome to the Oxford Strategy Review.

James Dancer Chair, Oxford University Alumni Board 1

Our Team

Founder

James Dancer Chair of the Board

Senior Leadership Team

Elliot Sturge, Nehmat Kaur, Wojciech Strupczewski Adam Thompson Editors-in-Chief Managing Director

Corporate Strategy International Affairs

Jaisal Kapoor Priyan Slevakumar Mika-Erik Moeser Laura Caccia Senior Editor Deputy Editor Senior Editor Deputy Editor

Global Economy Future Challenges

Dave Muriuki James Halsall Jessica Swafford Mirte Boot, Sarah Ehlinger Affotey Senior Editor Deputy Editor Senior Editor Deputy Editors

With Special Thanks to Daria Maria Koukoleva Brand Director

The Board

James Dancer

Chair of the Oxford University Alumni Board

Michael Unger Emma Weitzman Samuel Diaz Pulgar

Class Co-President President Cohort President Saïd Business School Oxford PPE Society Blavatnik School of Government

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Contents

Welcome to the OSR ...... 1

Our Team ...... 2

Editorial: The Green Recovery ...... 4 The Interview: Professor Chris Dye on pandemic preparedness and a sustainable future ...... 5

Corporate Strategy ...... 9 Editor's Note ...... 9 Understanding the lack of private infrastructure in Africa ...... 11 Two silver-linings of Covid-19: Why we need a ‘Green Recovery Now’ ...... 14 Data trusts: A silver bullet for private sector data management? ...... 18

Global Economy ...... 21 Editor's Note ...... 21 Consumer spending in an accelerated digital future ...... 22 Regulations-driven first-mover advantage in global capital flow ...... 25 Is private equity to blame for the High Street’s collapse? ...... 28

International Affairs ...... 31 Editor's Note ...... 31 Populist strongmen and climate change: A crisis of collective action ...... 32 Looser patent laws can help fight climate change ...... 35 Peter Cardwell: “Intractable” EU needs to be “realistic” about Northern Ireland Protocol ...... 38

Future Challenges ...... 42 Editor's Note ...... 42 In India, a lesson on poor environmental governance and economic loss ...... 43 Accounting for our future ...... 46 New kids on the blockchain: Applying the latest tech trend for good ...... 49

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Editorial: The Green Recovery

The coronavirus pandemic has led to an unprecedented surge in the political salience of climate change - arguably the first existential threat that humanity has had to face in unison, and which hazards ending civilisation as we know it. As states around the world turn their gaze to the post-COVID-19 period, economic recovery is at the forefront of their considerations. The global urgency for climate action coupled with the preponderance of post-pandemic recovery on political agendas, has led to international organisations such as the EU, global powers such as the US, and others, to frame their recovery in green terms.

That choice has profound, intersectional implications for the entire world. A green recovery will impact large and small corporations and their strategies by influencing global supply chains, regulations, industrial practices and countless other aspects. The broader global economy will face sea changes as powerful economic blocks impose carbon border tariffs or divert investments from environmentally-unfriendly businesses. Perhaps most of all, this transition will have substantial consequences for geopolitics, as states lock horns over reducing carbon emissions against the backdrops of age-old grievances, recent or ongoing conflicts, and deep political differences of vastly varied natures. Changes to state power and global influence will undoubtedly be quick to follow with consequences of great gravity for the lives of citizens around the world. Beyond its immediate effects, such a fundamental reshaping of the global economy and by extension, world order, will likely create long-term challenges for the future of our species.

This inaugural edition of the Oxford Strategy Review (OSR) seeks to shed light on these vitally important questions, at a time when major political forces are setting the stage for widespread and long-term changes to our world along the four dimensions outlined above.

Doing so exemplifies the core mission of the OSR: to provide its readers with cutting-edge analysis of strategic-level, intersectional issues which affect a plethora of disciplines, regions and domains of human activity. Moreover, rather than focus on the short- or even medium-term, the OSR’s horizon is generational - considering issues of supreme importance in the grand scheme of time. Its every edition will emulate this purpose by focusing on a central theme and providing research and analysis of it from the perspective of its four principal sections: International Affairs, Corporate Strategy, Global Economy, and Future Challenges.

We hope that you enjoy our inaugural publication and we look forward to supplying you with many more in the months and years to come.

Elliot Sturge, Nehmat Kaur, Wojciech Strupczewski Editors-in-Chief

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The Interview: Professor Chris Dye on pandemic preparedness and a sustainable future The Professor of Epidemiology and former WHO Director of Strategy talks to Elliot Sturge about the economics of disease prevention in public health

Elliot Sturge

— One of your focuses is the economics of prevention in public health. Would you like to briefly explain what's meant by that?

I've been interested in prevention in public health for a long time; I worked for years at the World Health Organization. During those years, it struck me that while we've been saying that prevention is better than cure for thousands of years, we rarely act as if we actually believe it. I've wanted to probe this a little bit more since leaving the WHO, and I've just written a book about it, called The Great Health Dilemma, which will be published next month. But fundamentally, it's an economic question. If I asked you, would you rather get vaccinated against COVID, or take the risk of getting COVID and suffering, then the choice is an easy one. But if you were a smoker, and I suggested that you stop smoking, because you’re going to get lung cancer, heart disease, or a stroke in 30 or 40 years time, you're going to make a different kind of calculation. 30 or 40 years away seems very remote indeed. Or if I say, climate change is the biggest problem we're facing on the planet at the moment, so why don't you stop driving your car and start cycling to work instead? Again, different kind of calculation. But all of these calculations are really about costs and benefits. Essentially it's an economics question. And by economics I don't just mean money is being invested, I mean, time, effort, will power, information. So in the book, I've explored this question in a whole variety of different settings. And the basic premise is, if we can adjust that balance of costs and benefits, make the benefits seem greater, and the costs seem smaller, then we're likely to invest more in prevention.

— Is this long-term preventative approach feasible for governments and businesses, which invariably have short time-horizons?

The long-term aspect of this is important. Let's take politicians; politicians operate on, let's say, a five-year election cycle. So the challenge in persuading politicians is to not just say, acting on climate change is the right thing to do. And this is not just politicians; it’s the public as well, and businesses. We have to get people to understand how to value the future more in the present. And there are various ways in which we can make that case. Let's take climate

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change as an example. We know very well that climate change is driven by greenhouse gas emissions, mainly carbon dioxide. But along with that, say, in the energy industry, greenhouse gases go with air pollution; air pollution kills three or four million people each year. Right now, if we stopped it, we would save three or 4 million lives each year. Those are our immediate benefits to politicians to act right now on air pollution, and at the same time, stem the rate of global warming. So there are a whole variety of ways in which we can make that kind of argument.

— Do you think this pandemic will be the spark for people and governments to start thinking that way?

We have an opportunity now, following COVID, that we haven't had for a long time, because the richest and most powerful countries are the ones that were affected hardest. And those effects are being very widely felt. And therefore there is a big political opportunity to act on that right now. We always look for the mechanisms and instruments that we have at our disposal, and the big one we have in the UK at the moment is that the UK is hosting G7, coming up shortly. G7 leaders are saying, let's have a better international treaty for pandemic prevention. Now that they're saying that, let's see how we can capitalise on other things going on that are related to that. We have the COP26 climate conference coming up this year, also hosted by the UK. There's a big opportunity for the UK to take action and leadership. We also have the G20 meeting, hosted by Italy, which follows G7. And there will be carry-over from one to the other. And we have other things that are related to that, like the Convention on Biological Diversity meeting, held in China later this year. Climate, biodiversity, nature, health, they all go together. That is another instrument that we can use. Having suffered badly, we're in a stronger position now than we have been for a long time with regard to the control of pandemics. I've worked through many epidemics and pandemics in my time: SARS, swine flu, ebola, zika. All of them were important at the time, but none of them have had as big an impact as COVID. And that's why we're in a really strong position to do something now.

— Does international cooperation need to happen more to achieve things like that? Would that help prevent another pandemic?

Recently we've seen a general acknowledgement that international collaboration is needed. What's really proven difficult is to translate that call for international action into practice. We have had a number of influential nationalist leaders around the world. The UK at the moment is nationalist in in its outlook, and that is problematic. What we've got to do, now that we have this opportunity, is put in place mechanisms for international collaboration that are not reversible. When interest in pandemics subsides, as it surely will, in a year or two, we need to have left behind a mechanism by which we can better respond to pandemics in future.

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— How should the international community deal with these nationalist leaders who don’t operate in good faith? Should they wait out the nationalist wave, or adapt to better encourage cooperation among nationalist leaders?

We need to go beyond what was a gentlemanly understanding of international collaboration. It's not going to survive even moderate tests of conflicts of interest. We need mechanisms that will survive those conflicts of interest. We need ways of changing the incentives towards cooperation, and incentives that move people away from nationalism, which is not helpful in the context of big global health issues. We need mechanisms which include a mixture of carrots and sticks, which incentivise governments to collaborate and cooperate. The nationalists have done a lot of damage around this pandemic and around other things as well, but the nationalists are losing their cause, and they're losing it spectacularly. Trump is out; Bolsonaro in Brazil is on the way out. His strategy on the pandemic, on deforestation in the Amazon, environmental destruction - this is not supportable in the long term. We're seeing at the moment in India the crisis that Modi has created, and the crisis that he has created for himself as well. These kinds of nationalist politics are not going to survive, because the damage that they have done is enormous. There's going to be a strong argument in favour of collaboration.

— Will the lessons being learned from coronavirus be translated to climate change?

There are similarities between preventing pandemics and mitigating or adapting to climate change: essentially, how much am I willing to invest now, in preventing something that might not happen in future? What are the costs and benefits? Climate change, in that sense, presents the same sort of question as a pandemic. But the calculus is quantitatively different. And the challenge with climate change is persuading people that everyone has a stake in it; that what they do now can contribute to mitigating or adapting to something that is almost certain to happen, but will happen long into the future. Although the evidence of climate change is beginning to make itself increasingly present.

— The effects of climate change are currently mainly most obvious in poorer countries, often in the global south, while most rich western countries are comparatively sheltered. Do you think the remoteness of the concern is what’s hindering mass public awareness of, and concern for, climate change?

Well, the remoteness of the concern is diminishing. It's becoming clear to people that they're going to take some big local hits from climate change, for example, flooding, drought, extreme weather conditions of various kinds, wherever you are in the world. But on climate, we need to look at where the big forces are in the world: overwhelmingly now, the threat of climate change is clear to the most powerful forces, that is, those who are responsible for the money behind the world's energy supply. Those who are responsible for massive financial investments, for example, in pension funds. In other financial investments with broad portfolios, the argument has basically been that climate change is important, and now it's all about managing the transition away from fossil fuel use to renewable energy economies.

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Everybody knows that's true. Every day in the media, you see new indications of how important that's going to be. Just yesterday, Exxon recently warned its shareholders that they face an existential crisis if they stay in fossil fuels. The hope is that as this movement begins slowly, it will then begin to accelerate; we'll cross a tipping point of divestment away from fossil fuels and towards renewable energy.

— Is large-scale structural change necessary for a sustainable future? Or are we on the right track?

The way in which that happens will be partly through collective agreement; the Paris Agreement was really a landmark. But there's also going to be the economic forces, which are going to drive decisions made by individual businesses. And we need to look at the most important, the most powerful, most influential of those businesses; the energy companies, the big investment companies, they're already making those decisions. They're going to make them irrespective of international agreements, because those agreements will be in their own interest. What we have to do is change the incentives so that people work more quickly in that direction. People will say, the sort of line I'm giving you at the moment is too optimistic, [to expect] a cascade of movement away from investment in fossil fuels. I understand that there will be resistance to that - though there is the green wash that happens from energy companies and so on - they will hold onto investments where they can make profits, at least in the short-term. It's not going to be completely straightforward. But I do see a hopeful future, because we're only going in one direction here, and that's away from fossil fuel.

— Will the free market naturally adapt to become sustainable, or is intervention necessary?

Government needs to use all the instruments at its disposal to change the incentive structure for private businesses. It needs to make investment in renewable energy even more economically attractive. There are market forces which are bringing down the costs. For example, solar energy or wind energy; That's engineering. That's a response to investment in the private sector. But government has a role in framing the parameters for the debate and reinforcing incentives, particularly in spotting the areas where the market will take care of itself and do what we want it to do - for example, the generation of cheap energy from solar. Where government needs to help is in the areas that are likely to be more difficult. One of the areas that is more difficult, particularly in the UK, is the way in which homes are heated. That’s going to require an investment away from use of gas in particular, and towards other more sustainable forms of electricity. That's not going to happen easily, because many households simply can't afford to invest in that; they need government support to do so. So the role of government is to identify where the market will do the thing that everybody wants it to do, and then weigh in and use more government power to tackle the areas that are more difficult.

Professor Dye’s book, The Great Health Dilemma, will be available to buy from the 27th of May, and can be ordered here.

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Corporate Strategy

Editor's Note

Government and industry must both be prepared to navigate constantly shifting political, economic, and social forces. To do this effectively, and ensure sustainable growth in the process, they look to strategy to chart the path forward. The Covid-19 pandemic has shaken the foundations of politics and business, exposing the flaws in these systems. However, the demise of this old order gives rise to new opportunities to learn from past mistakes and recover in a way that is complementary to our natural environment. Countries across the world are working on their pandemic recovery strategies, many of which intend to be “green,” or environmentally positive strategies. Businesses are following suit, by committing to net-zero targets, with some even setting carbon negative targets. The current moment therefore presents us with a unique chance to rebuild, and re-define original paths to growth through an environmentally-conscious lens.

Oxford University’s home-grown Green Recovery Now (GRN) is a student-led movement advocating for the green and fair recovery from Covid-19. Its subgroup, GRN UK, seeks to influence the UK government to invest in climate-friendly policies to spur economic recovery from the pandemic. In “Two silver-linings of Covid-19: Why we need a ‘Green Recovery Now’,” Oliver Storey talks about the need for support from the central government to empower the UK’s regional economies in a sustainable manner. The importance of local industries is paramount to ensuring that clean growth is a bottom-up process, and not one restricted to the highest level of government or big businesses. Recovery strategies need to be inclusive, and take into account local leaders who have the expertise and insight on how to regenerate economic practices within their societies.

On the topic of government strategy more broadly, Priyan Selvakumar’s article ‘Understanding the Lack of Private Infrastructure in Africa,’ brings to light an important conversation about untapped potential for investment in the region, and solutions to mitigate some of the risks borne by private investors. At a time when governments across the globe are focusing on economic growth and recovery, strengthening infrastructure in African countries will be a key component to the region’s development; one which promises positive knock-on effects for the world at large. A sure strategy for this growth includes plans to bridge potential gaps or inefficiencies that might exist; and this can be done in collaboration with the private sector and other key national and international stakeholders. This piece serves as a reminder that

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developing sound strategies for growth requires multiparty interactions and information flows across sectors and geographies.

In my article ‘Are Data Trusts a Silver Bullet for Private Sector Data Management?’ I discuss a different, but pertinent issue, given the rapid pace at which lives have moved online: how to govern data. While laws exist to guide this process, there are still important considerations around user consent and information asymmetry. In response to this, businesses are now considering innovative solutions for data privacy. One such alternative is a data trust; a third- party that has a fiduciary obligation to the beneficiary to hold data securely. While there are both merits and demerits to consider, data trusts are worthy contenders of the way forward when it comes to business strategy and how to mitigate risks from the collection of big data.

Jaisal Kapoor Senior Editor, Corporate Strategy

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Understanding the lack of private infrastructure in Africa Why Africa’s infrastructure problem needs addressing, and what’s holding it back

Priyan Selvakumar

he importance of improving African infrastructure is almost unanimously agreed upon. T From water and electricity to transportation and communication, African infrastructure lags behind both the developed world and many of its emerging market peers. Developing this infrastructure is necessary for improving the immediate quality of life for tens of millions, and, perhaps more importantly, the infrastructure is necessary to enable and accelerate African development into the future. High-quality infrastructure improves both intranational and international trade, provides access to more productive technologies, improves health and educational outcomes, and generally facilitates further sustainable development.

It is equally clear that the infrastructure needs of Africa well exceed the financial capacity of African governments. Despite this, governments in Africa fund a higher proportion of infrastructure projects than almost any other region. In Latin America, the national government funds 60% of all infrastructure, and in the US this figure is 25%. However, in Africa, it’s close to 95%. The dearth of infrastructure combined with a dearth of capital by its primary source funding highlights a clear need for external financing. The natural source would be the private sector. With a few exceptions, domestic firms largely lack the capacity necessary to fund large-scale, capital-intensive projects. This leaves international private capital as the only viable hope for closing Africa’s infrastructure gap.

Surprisingly, private investors have both the capital and the desire to invest in African infrastructure. This creates an ecosystem where investment opportunities are ripe, investors are able and willing to invest, yet very little investment actually takes place. What explains this gap? Economists generally treat the financial sector as perfectly rational; the hypercompetitive financial marketplace witnesses armies of very intelligent investors competing for every possible percentage of additional returns. In other words, there are very few viable investment opportunities that are not discovered and invested in over the long run. It therefore seems unlikely that underinvestment in African infrastructure can be attributed to investors simply not seizing the opportunity and leaving potential returns on the table. If investors are pursuing these opportunities, there is only one feasible explanation left: difficulty in the actual deployment of capital.

As it turns out, deploying capital into emerging market economies presents multiple systemic challenges. The largest of these is political risk. While such risk is present in all

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facets of an emerging economy, the public-facing nature of infrastructure assets significantly enhances this risk. For example, the potential revenue, and therefore the value, of a road is determined in large part by the road network it is connected to. If a new highway is built parallel to a particular road, then traffic and toll revenue is split between them. In contrast, if new infrastructure is built that increases the accessibility of an area, traffic and revenue may go up. When the government funds a project, it internalises this risk and also has direct control over the commissioning of future projects that may impact the value of the current one. The opposite is true for the private sector, which has no control over future projects and essentially cedes substantial influence over the project’s future valuation to an often-volatile government. Similarly, the volatility and unreliability of these governments can create precarious legal situations that can expose investors to unpredictable seizure or reallocation of assets, taxation and other expropriation expenses.

Political risk only tells a part of the story, however. Certain World Bank programmes, such as the Multilateral Investment Guarantee Agency, have developed effective insurance products that protect companies against various forms of political risk. Additionally, the returns on infrastructure assets in African markets are several multiples of the returns for similar assets in developed markets creating an attractive risk-return profile even with the extra risk.

The final piece of the puzzle is the complex process of identifying and commissioning projects. Sophisticated private investors require detailed plans and analyses to make investment decisions. While the government generally collates this information, international consulting firms can also take on this work. However, government involvement is crucial in hiring the consulting firms, defining the parameters of the projects, and connecting private investors with this information. Unfortunately, it seems that emerging market governments, at both local and national levels, do this poorly. This leads to information asymmetries between private and public stakeholders and adds significant costs to private investors. The issue also leads to overestimation of risk due to the lack of accurate information. Ultimately, the high cost of actually deploying the capital into specific projects deters private sector investment.

These dynamics are problematic for the citizens of developed and developing countries alike. Africa is one of the world’s fastest growing regions and the infrastructure needs of its population will only continue to grow. According to the World Economic Forum, two out of every five children born will be born in Africa by 2050. Ensuring this enormous population can equitably participate in the global economy requires sustainable and accessible infrastructure. Furthermore, the goals are not as daunting as they may seem. Asset management firm Mercer estimates that it would require a mere quarter of a percent of the investment assets held by investors in OECD countries to close Africa’s infrastructure

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funding gap. But it is not just the wellbeing of Africans and future economic ramifications that are at stake; there are also geopolitical security concerns for Western countries.

The presence of Chinese government capital through bilateral financing partnerships presents an interesting addition to the African infrastructure ecosystem. Chinese financing is not tied to any of the regulatory, developmental, or human rights benchmarks that OECD capital is often contingent on. Rather, Chinese capital is accompanied by political requirements such as recognising One China. The political implications give Western OECD governments an additional incentive to ensure that the African funding gap is addressed by private investors in OECD countries. Western governments can take stronger steps to ensure that the bilateral and multilateral projects they undertake alongside private partners are a key priority.

Closing the funding gap will require cooperation between multiple stakeholders: African governments, OECD governments, private investors, and international development organisations. African governments must work to develop their capacity to plan, study, and advertise their projects to potential investors. Investors can be more willing to make upfront investments to reduce information asymmetry that disincentivises investment. OECD governments and development institutions such as the World Bank can reconfigure how they approach investment and focus on supporting the aims and goals of local governments. Regardless of what actions are taken, the need to address the systemic breakdowns in the process and foster stronger collaboration to fund a sustainable future for African infrastructure is clear.

Image source: McKinsey & Co

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Two silver-linings of Covid-19: Why we need a ‘Green Recovery Now’ The pandemic is an opportunity for the systemic changes necessary to fight the climate crisis

Oliver Storey

he Covid-19 pandemic stalled the world economy and has subsequently affected every T aspect of our social lives. The damage of this crisis has been distributed unevenly across the world, within nations, and all the way down to the household level. But from this great tragedy, two silver linings have emerged. A historic truth has again become common sense, and an existential challenge is receiving the attention it requires. There is an opportunity to overcome the suffering brought this past year and take on the already existent challenges facing society. We can bring about a fair and green recovery out of this turmoil that will benefit the socio-natural world which we all inhabit.

The historic truth in question is that the state has tremendous power to manage and engineer our social and natural world. It has been doing so for decades, although not always in the interest of all its citizens, and in increasingly less obvious ways. The current public health challenge has forced it into action, to protect lives, save jobs, and defend the collective interest of all citizens. Now the people expect the state to play a significant part in our economic recovery. The pandemic – a human-induced product of environmental destruction – is entwined with the greater, more existential threat to our world: climate breakdown. Whether this has been ordained or is merely the inevitable result from human encroachment into nature, one global crisis has propelled another to the top of the world’s priority list and shown us the means with which to fix it.

These two outcomes present an unmissable opportunity. We must use the state to make the economic recovery green and fair, and work to ensure the prosperity and security of the human race across the world. While a green recovery is common parlance amongst world leaders today, the adoption of green politics in the mainstream is also accompanied with rhetoric, as is often the case in politics. There remains the task of preventing greenwashing, promoting a recovery that is fair, and challenging the already existent inequalities in our society. The crisis has compounded the woes of those least well-off; that alone is reason enough to challenge inequality. But at a time of large public spending and the agreed-upon need to do so, the challenge is creating lasting changes with this once in a generation opportunity.

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It is problematic to determine the mainstream of any political discourse on the examples of the US and UK, but the US covid recovery stimulus is a fundamental sign of green becoming mainstream. Whether it can be dubbed the ‘Green New Deal’ remains to be seen. PM Boris Johnson’s announcement that his Ten Point Plan for a Green Industrial Revolution, promising 250,000 jobs, was applauded. However, this plan has had many critiques based on funding and the ability to execute. Similarly, President Joe Biden’s plan fails to match the 2008 stimulus spending, with only 12% spent on low-carbon projects. Rhetoric and greenwashing are a present challenge that needs confronting.

But how do we know what kind of green recovery we want or can feasibly deliver?

Challenging inequalities should occur at an international, national, household, and individual level, correcting deficits in health, education, income, and representation. Perfection is not the goal, but these targets direct strategy, combined in context specific variations of importance. This is an incredible opportunity to be bold in our state strategy and have the state directing elements of economic transformation. This has been done before through Developmental State models in East Asia post-WW2 in their own manner. Green is now the necessity at the heart of such a model, as the climate crisis threatens the whole of humanity, to differing degrees and through indirect channels, such as forced migration.

At the crux of the Developmental State was a political consensus for an overarching national mission of development and economic progression. This included welfare benefits for capital and workers, as well as oppression. The Developmental State can morph and reflect different models depending upon the time and place. The UK can implement a strategy underpinned by democracy and the need for less inequality, through the industrial programme of Green Economics and societal decarbonisation. This is also a chance to use the energy of local democracy and civil society collectivism that the pandemic has brought to the fore. There are communities also willing to engage in the Climate Crisis. That is why a Local Green New Deal framework is being floated as a serious discursive and technical paradigm from which to achieve the ambitious plan of minimising inequality.

The framework promotes the devolution of powers and resources from central government to local government, to share responsibility for growing a green and fair recovery. Critically, the UKhas some of the worst regional inequality in the world, which urgently needs addressing. Local government working effectively can share the burden of tasks with central government, making the greening of our society faster. It is important not to lose sight of the green element of such an ambitious strategy. While the UK claims to be a climate leader, it is currently not on track to meet its 80% reduction in emissions by 2050, and is predicted to miss its fourth and fifth carbon budgets. The All Parliamentary Net Zero Group has published a 10-point plan for rectifying this stall by first and foremost setting out a Net Zero Roadmap – a holistic governance strategy for making change happen. Along with this plan, an estimated £40bn of spending is needed a year to reach the 2050 target. 15

The phenomenal spending during the pandemic shows us that the capacity and conditions are there for huge state investment, that they can operate autonomously well at the local level, and that they are needed to lessen the economic contraction Notably, the local track-and-trace service outperformed the outsourced and centralised Serco Track and Trace, described as a ‘disaster’ for not involving local health networks. A Local Green New Deal aims to all do all of the small things necessary to keep emissions down, to do it well, and do it a lot. This is not always within the remit of central government, and the state has many modes of expression, whether it be public corporation, private corporation, or civil society. The transition to environmental sustainability includes many exciting and innovative combinations of these actors. But they are all underpinned by the challenge of tackling the long-term damage of austerity, streamlining social, economic and environmental strategies, and facing emerging crises in housing, education, training, incomes, gender equality and access to fulfilling work.

Research, such as the Centre for Local Economic Strategies, argues that “local authorities now need to view every single function through a climate emergency lens.” This must be substantiated with ideas from the Feminist Green New Deal framework that counts care-work as infrastructure investment, for example. Lessons can be learned from local industrial strategies, and we should take advantage of the governance and strategy role of combined authorities, councils, and Local Enterprise Partnerships (LEPs). Clean growth strategies are just part of the road to achieving a green and fair recovery.

Critically, Green Alliance analysis argues we do not “need to keep reinventing the wheel” of governance and strategy; we have institutions and resources available for regions to “play to their strengths.” Unfortunately, the Climate Change Committee found that the “powers, levers, and influence available… are constrained by significant funding and resource challenges.” Without spending now, the UK faces more local government cuts, as councils face an £11bn budget hole from 2020/21, and unemployment at 2.2 million by the end of the year, 6.5% of workers. Recent research from Green New Deal UK argues a green stimulus plan could produce 1.2 million jobs in two years. The logic behind and need for localised green recovery plans is there, but the support and coordination from central government is not.

But how do these ambitious ideas find their way to national policy?

The problem with strategy is that it so often gets left on the page. There is a wealth of material on green recovery and its prudence; the idea for a Green New Deal was circulating at the time of the 2008 crash. It has taken another global crisis and 14 years for green politics to take precedence. Obviously, the contexts are different and the pathway to green politics is neither linear nor entirely knowable, but there has been an observable change. The work of think tanks and protest movements such as Extinction Rebellion – the ones that are actually disruptive – provide the push and pull that gets the climate crisis attention. The UK 16

declared a climate emergency first. This ran parallel to increased media attention on the climate and the beginning of Extinction Rebellion’s ‘summer uprising’.

The work of groups that produce research and advocacy, and even agitation and disruption, for a cause are effective, but not in clear and direct manners. Rarely does the advocated strategy find its way perfectly from paper to policy, but the production of the more extreme strategy produces a political pull or push known as the radical flank effect. This can produce a negative effect of alienating the centre ground, or preventing the election of a party willing to implement such a policy. Joe Biden is a centrist and has adopted these radical green policies from the progressive left of the Democratic Party. Such radicalism can also stop effective leaders from being voted into office due to alienation in the voter base, as may have happened to Bernie Sanders. Eventually, grassroots activism and think tanks should be able to take part in the paradigm or policy shift they help bring about. However, this is never guaranteed and such politics – the fight over what the green political consensus is and how best to implement it – continues as a struggle between the centre and the radical flank.

Grassroots activism can take the form of student groups as GRN UK, a subsidiary of Green Recovery Now, a student environmental group in Oxford fighting for a green and fair recovery. They are a part of the endeavour of research activism, using student research capabilities to educate on and advocate for a fair and green recovery. One advocacy method commonly used is public policy briefs. These can help outline local strategy, public policy, and social outcomes, framed by a green and fair recovery as its metrics of success. This brief is an analytical and strategic two-page argument that ties in civil society, state, and market actors, neatly defined social equalities of measure, and the appropriate policy and administration flows that produce economic recovery whilst explicitly directed against social inequalities.

The two silver linings of this pandemic leave us with no excuse to not harness the power and resources of the state to take on the world's existential crisis and shape our societies in a way that is fair. Central government is necessary for providing overarching legitimacy, confidence, and insurance for these drastic structural changes. But it is at the local level where we find true innovators and leaders that need to be given the power and funds to regenerate the UK’s regional economies in a way that is green and fair. These radical ideas of restructuring become mainstream because of advocacy groups discussing strategy and campaigning for it. The challenge today is having advocacy bodies combining in voice and message in the run up to COP26.

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Data trusts: A silver bullet for private sector data management? The most prominent advantage of data trusts is what it says on the tin: providing a framework for trust-building between parties

Jaisal Kapoor

An Introduction to Data Trusts irms and governments are collecting an increasing amount of data through Artificial F Intelligence (AI) development and applications. Countries are rapidly developing their national strategies to generate AI capabilities and foster innovation. However, there is a lack of sufficient mechanisms to manage and regulate its use. This can exacerbate existing issues such as algorithm biases, hacking, and surveillance, which are just some of the many problems that arise from harvesting large amounts of data. With reference to the development of smart cities, The Atlantic claims “the city of the future is a data-collection machine”. As governments’ develop AI policy, many companies across sectors are integrating AI into their business models. This massive emphasis on digitization and AI development calls for a more urgent response to the gap in the data management framework. One solution that businesses can look to is the use of data institutions to effectively manage internal operations and build trust with the public.

One kind of institution gaining traction is a data trust, defined by the Open Data Institute (ODI) as “a structure that provides an independent, fiduciary stewardship of data”. These are third party institutions that manage data on behalf of companies, to ensure responsible use. They help improve accountability and transparency within data management and sharing. While regulations such as the EU’s General Data Protection Regulation (GDPR) exist to guide the storage and use of data, there is still a significant need for data governance that allows individuals and firms to gain control over these decisions.

Can Data Trusts Improve Data Sharing Frameworks? The ODI identifies seven benefits of data sharing to businesses: “improving market reach; supporting benchmarking and insights; driving open innovation; driving supply chain optimisation; embracing regulated data sharing; addressing sector challenges; and building trust”. With firms embracing these benefits, data trusts seem like a viable option through which to manage these processes.

The most prominent advantage of data trusts is what it says on the tin: providing a framework for trust-building between parties. This allows consumers an amount of control

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over their personal data that was previously missing. While websites and mobile applications now require consumer consent to store and share data, meaningful consent is difficult to provide when there is a lack of information about the choices being made. This power imbalance has been compared to medieval feudalism, in which data is either publicly available, or managed on behalf of consumers through a “digital oligarchy”. Enabling consumers to entrust decision-making to a trustee, who has a fiduciary duty to act in the interest of the beneficiary, helps align seemingly disparate interests of individuals and firms.

As a part of its initial data trust pilots, the ODI in partnership with nonprofit The Waste and Resources Action Programme (WRAP), evaluated how data trusts could be used to support food waste reduction through business-to-business data sharing on supply chains. The pilot found that data trusts could help to “connect food waste to other datasets, replicat[e] WRAP data sharing arrangements in international markets, provide a process for negotiating food waste definitions and measurement standards, and gather and share sales data to provide insight into the demand for food”. However, the flipside was that some companies were unwilling to share data because it might hurt their reputations or exploit existing power dynamics within the food sector, such as between retailers and manufacturers. As a result, businesses need to carefully explore the costs and benefits of data trusts and how they can add value.

What are the Risks Involved? While data trusts might seem like an effective way of safeguarding consumer data, there still remains reason for caution. There are unanswered questions about how the trusts themselves are regulated, if they might be used to mask profits gained from data or avoid data protection regulations, and how vulnerable they might be to hacking.

This skepticism is exemplified by concerns about Sidewalk Labs’ smart city initiative in downtown Toronto. The organisation, a subsidiary of Google’s parent company Alphabet, developed a 200-page vision document of smart-city features such as cameras and sensors for what they called “ubiquitous sensing”. The project caused much controversy; citizens of Toronto raised a number of concerns about lack of public input in the project and privacy protection. Sidewalk Labs responded by proposing an ‘Urban Data Trust,’ to allow for collective public-private governance in the management of data collected through the project. However, plans to develop this trust broke down because of a failure to manage multiple stakeholder interests and develop a collaborative data governance structure. While data trusts might seem like a sure remedy for bridging the trust gap, it must be accompanied by a strong collaborative mechanism for doing so.

Examples such as these give rise to important questions about how to structure the data trust, gain consent from the parties involved, and how centralised the model should be. It is also important to consider questions such as how the trust will be funded, how these

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trusts will compete for members, and whether this might give trusts bargaining power amongst different organisations. Given this vast number of considerations, markets in consulting and software within the sphere of data trusts are quickly developing.

The Path Ahead While firms seek to benefit from data sharing, data trusts might be the optimal way to do so. Their potential to unlock value to businesses through innovation, lower costs, and stronger ties with the public is an alluring opportunity. However, business leaders remain apprehensive about the risks. In a survey of over 1,000 executives in AI, 64% of respondents claimed that data regulation needs to be changed or clarified, and 58% stated that industry standards need to be developed before their firms will begin sharing data. Each firm will need to address a number of questions that arise about their use of trusts and how to ensure effective data governance within the framework they choose. While the promise of data trusts is shiny, the private sector should not mistake it for a silver bullet.

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Global Economy

Editor's Note

The disruption in our daily lives that Covid-19 has forced on us has given the planet some time to catch its breath by dramatically cutting carbon emissions. As the world collectively looks toward a recovery in the coming years, emissions will surely rebound. The massive stimulus plans that governments worldwide are rolling out will have implications for climate change, whether explicitly targeted or not. Voices around the world have called for a ‘green recovery’: a call to not only build back battered economies but to do so in a sustainable fashion.

The implementation of the EU’s Sustainable Finance Disclosure Regulation is a step in the right direction. In a piece on the SFDR, we see how regulation could actually create a competitive advantage for early adopters, precisely the kind of win-win situation the world needs to promote going forward.

This week, we also take a look at some unintended consequences of the pandemic – we’re now further along in digitisation at this point in time than even the most optimistic among us could have predicted. We see what that means for the retail industry, how companies had adapted to the change and what the future holds.

Focusing on the intersection of retail and high finance, we turn our attention to domino-esque collapse of iconic brand after iconic brand. Private equity has taken much of the blame for the failures. In a piece analysing the charges against the industry, we tackle the charge against the industry at private equity’s role and break down the facts as we see them.

From James and I at the Global Economy desk, we wish you happy reading and a productive week ahead!

Dave Muriuki Senior Editor, Global Economy

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Consumer spending in an accelerated digital future When tomorrow’s digital future becomes the present, what gift can consumers expect next?

James Halsall

hether we are spending time in a UK pub, buying new clothes, purchasing a book, or W ordering those cosmetic essentials, these activities have been drastically changing over the last decade. Nothing has accelerated these changes as considerably as the covid- 19 pandemic. The coronavirus has significantly changed customer behaviours — deeply affecting consumer goods’ value propositions and, in turn, accelerating the need for higher levels of convenience, availability, and better pricing. So, what happens next?

It is essential to remember that at the beginning of 2020, before covid-19 was part of our lives, the consumer environment had already been experiencing a shift in how we were spending our money, and this could be seen broadly across many segments. The past quarter of a century introduced new operators to the consumer goods model. In 1994, Amazon began selling online goods to customers. 1995 saw eBay begin trading via an online marketplace. In 2000, this increasingly prominent online presence led to the incorporation of Ocado for a dedicated online grocery shopping service. In 2013, Deliveroo started to deliver restaurant food to your door. The following year, Just Eat began trading in Denmark and quickly expanded. This brief timeline highlights some key disruptors and illustrates the rise in importance of digital channels for both businesses and consumers. Today, all major and start-up brands have this necessary online presence as a core element of their business model canvas. In addition, Amazon, Uber and Deliveroo have established themselves in the UK as critical employers for gig-economy workers who support this operating system; and in doing so have disrupted the typical business structures by employing a growing number of on-demand contractors.

Since 2015, the retail and hospitality sector in the UK has been experiencing the hangover of the discount-led, or volume-driven, trend of the 1990’s and early 2000’s, generating a by-product of greedy landlords due to eager private equity funding in fast and reckless attempts to scale. One of UK retail’s biggest dilemmas in the past decade has been Brexit. This issue further impacted two key expense lines of the profit and loss statement — wages and the cost of goods. With these pressures increasing, retail, hospitality, and leisure businesses have been exploring new captive channels for sales.

The travel industry has also experienced a shift away from traditional offerings. Pre- pandemic, companies identified an increasing willingness and acceptability of a remote

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working culture that, together with a long period of cheap travel and increasing globalisation, had given rise to a globe-hopping, digital-nomad traveller. Creatively marrying the acceleration of digitisation with the need to explore, experience adventures, and do this for long periods of time, all from a backpack. What followed were fast growth companies such as WeWork, that bridged the costly gap of workers and offices by selling attractive workspace to flexible businesses and memberships for remote workers. This attracted strong investor fanfare and achieved remarkable growth of 499 locations in the four years leading up to 2019. This business model has also been adopted by hotel companies such as Generator, Nomad-Stays and Selina, the latter even creating a subscription system during the pandemic that caters to regional travellers.

On 23 March 2020, the UK implemented restrictions for retail, hospitality, and leisure units and almost immediately saw casualties. Despite government support, companies that had good market share and dominance began to file for insolvency. Such as T.M.Lewin (a men’s office clothing brand), Paperchase, Monsoon Accessorize, Oasis & Warehouse, key brands of Arcadia group, Jessops (camera stores), Benson Beds, Harveys furniture, and even British institutions such as Debenhams. For these companies, the reliance on footfall to maintain an increasingly tight profit line is to blame for their troubles. There were also a high number of strategic company voluntary agreements (CVA) being used to break from difficult locations and/or away from uncooperative landlords. Either way, one theme these companies share, is making little effort to diversify into the emerging digital space, which could have helped each failed business maintain a better level of economic resilience.

Although there are companies that haven’t been investing in the necessary digital channels with their customers, there are also many consumers who, until now, have not used these channels, such as the elderly. It has been said that this pandemic has increased this ‘yet to be infiltrated’ customer base, thus increasing the user market to new and higher levels. This is one of the reasons that prompted Goldman Sachs to recently express that despite global digital evolution already being in a state of exponential growth, we have been pushed to 5-10 years ahead of that curve due to this pandemic.

Within the first few months of the 2020 UK lockdown, the already narrowing gap between UK suppliers and customers had found new depths via these digital channels. But this has caused a higher stress on an already-stretched logistical service attempting to keep up with an increasing demand which is being pushed beyond its capabilities. Businesses that were organised for this prospered — shown by the unpredicted growth of companies such as The Hut Group (online retailer) and Deliveroo, both executing IPOs over the last six months. It is no coincidence that with company sales soaring high, due to customer behaviours relying on online delivery platforms, that this was a timely point to do an IPO.

With mobile-commerce volumes rising at a compound annual growth rate of 25.5%, this movement of convenient purchasing will only continue to grow. With mobile devices 23

being such an integral part of how we operate, the use of Artificial Intelligence (AI) and Augmented Reality (AR) is a certainty. How will this emerging trend of joining of the physical and digital experiences impact the solely physical customer experience?

Whether in the UK or internationally, each retailer will need to maximise the customer experience both digitally and physically. A supermarket in the UK recently trialled AR technology through the customers’ mobile devices to guide them down the aisles in the most efficient way to shop for their items – whilst suggesting additional items (upselling) through its algorithms. Another example of this, is digital hologram images of restaurant menu items projected to the table to inform customers of their meal options. Smart mirrors are being trialled in some clothing stores that scan the customer’s body and show them what items would look like without trying any clothes on (a suitable way around current covid-19 safety restrictions). The results of these experiments are currently unknown, but what is clear, is if corporates do not invest in data analytics and usable technology for their customers now, they are likely to encounter unbreachable barriers to entry in the future. The future is likely to be even more digital, and further integrated into a unique customer experience. More personalisation, more theatre, and certainly more digital technology.

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Regulations-driven first-mover advantage in global capital flow A competitive advantage from doing good

Eduardo S.F. Alves

any things will have permanently morphed by the time the world emerges from the M depths of the coronavirus pandemic. Among these changes is the most substantial interest in environmental, social, and governance (ESG) related investments ever seen in the history of institutional investing. The demand for sustainable investments has significantly gathered pace with the recent push by supranational organisations and governments to steer the world economy away from its dependence on carbon-emitting growth. The coronavirus pandemic is an unambiguous reminder of the potentially devastating havoc that would be wrought by a global emergency such as a significant climate-related incident.

the days of the Kyoto Protocol, there has never been as much interest in sustainability investments as there is today. Sustainable debt issuance is poised to reach over $700 billion in 2021, according to S&P Global. This constitutes a significant increase from the $500 billion in 2019, which was already double the figure from 2017. The market shift towards sustainable investments has steadily picked up pace during the last decade and drastically increased in attractiveness in the two years prior. This continued shift in investors’ preference directly reflects an underlying change in public awareness of sustainability issues in developed and emerging markets. Further reinforcing this trend is a new generation of sustainability-minded investors with ample investable capital.

A report by Morgan Stanley indicated that as of 2019, 80% of surveyed asset managers incorporated sustainability metrics in investment decisions. However, the strong market demand for sustainable investments coupled with a lack of relevant standards and comparable data has led to a flurry of investment offerings that simply appear to promote “greenwashing,” the practice of paying lip-service to environmentalism for PR purposes, without serious concern for the cause. Such practices undermine investor confidence and weaken the position of genuinely sustainable market participants. As often happens, regulators and standard setters must play catch-up to create a competitive playing field and relevant investor protections. EU regulators are off to the races in a move that may result in a sustained comparative advantage in attracting capital to the region.

According to Reuters, US-based BlackRock, the world’s largest asset manager, expects the Sustainable Finance Disclosure Regulation (SFDR) to increase demand for sustainable investment products in Europe. On the effective date of the initial part of the

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regulation, BlackRock disclosed that it categorises 17% of its assets under management as sustainable. In its drive to be the sustainable finance market leader, it expects that, going forward, 70% of its offerings will be categorised as sustainable.

The Sustainable Regulation from the European Supervisory Authority aims to redirect capital to more sustainable businesses and promote greater transparency in the ESG investment market. On 10 March 2021, the first part of the Sustainable Finance Disclosure Regulation came into effect. Its goal is to bring in a standardised and transparent reporting process for sustainability-linked financial products marketed within the EU. SFDR represents a significant advance in the EU’s commitments under the UN 2030 Agenda. Ramifications are sure to go beyond the immediately-targeted financial market participants (FMP) and the European region. Complying with the rules will make it challenging to perpetuate greenwashing by forcing capital providers to openly assess and categorise investment products according to their ESG impact.

EU-led ESG regulations create a first-mover advantage for European companies. An influx of capital availability is expected for companies that can demonstrate adherence to SFDR. Furthermore, this capital promises to be cheaper, according to a report by S&P Global. Crucially, it points to emerging evidence that sustainability-focused companies appear to perform better than competitors through superior management. It might be inferred that ESG could have a material impact on future credit rating actions by all major credit rating agencies as they compete to play a significant role in supporting the ESG market. Further to the expansion of green bonds tied to specific sustainable activities, sustainability-linked loans are better suited and more accessible to small and medium enterprises because such funds can be used for general corporate purposes.

To comply with the SFDR rules, capital providers need to collect sustainability- related information from companies in their portfolio. That means companies seeking capital must comprehensively identify activities impacted by sustainability risks and be required to disclose such information to obtain financing. Non-EU asset managers must comply if they market investment opportunities within the EU. ESG disclosure requirements will only intensify in the coming years. Financial market participants that do not keep up will be left at a significant disadvantage. Achieving such transparency will require a lot more data, including data not previously collected. ESG data aggregators and providers have a considerable role in oiling the ESG market machine and bringing about greater transparency. Financial market participants can and should use data providers to help reduce the time and cost of SFDR compliance.

As other elements of SFDR come into effect, what may feel to many like a burden is poised to become a significant advantage for adopters. European financial market participants are uniquely positioned to become pioneers in the new sustainable investment. The EU is leading the way in the sustainability investment arena, leaving other financial 26

centres behind. No regulation is without issue, but SFDR is a reasonable opportunity to move in the right direction. EU FMPs should eagerly embrace SFDR as a regulatory-backed way to gain a competitive advantage. Companies can take advantage of this opportunity to attract cheaper capital and boost their post-pandemic rebounds.

The unquestionable reality is that without a quantifiable long-term commitment to sustainability, it will become increasingly challenging for companies to attract capital. Sooner rather than later, poor ESG performance will become tantamount to poor business performance. European companies stand to gain a significant global advantage by increasing ESG transparency and alignment with SFDR.

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Is private equity to blame for the High Street’s collapse? Investigating the charges and culprits in this commercial whodunnit

Dave Muriuki

ebenhams, Cath Kidston, Toys ‘R’ Us, Poundworld and TM Lewin. All former High D Street brands that have collapsed into bankruptcy, all also once owned by private equity firms. In an investigative piece by Channel 4 Dispatches, former workers and executives alike have pointed an accusing finger at private equity, laying the blame for the fall of their former employers, and the loss of over 29,000 jobs, at the feet of the industry.

Let’s get some definitions out of the way and get on the same proverbial page. Look up private equity and the general thrust of the definitions you’ll find is that the term refers to an alternative form of private financing away from companies, away from the public markets. That definition would include early-stage venture capital, growth equity and leveraged buyouts. Leveraged buyouts, where significant amounts of debt are used to finance the acquisition of targets, were the primary way in which the industry conducted their foray into High Street. For the purposes of this article therefore, references to private equity are to leveraged buyout specifically.

So what exactly are the charges against the industry in the High Street whodunnit? In Debenhams’ case, it’s that one of the root causes of the brand’s collapse is the sale of 23 stores in the mid-2000s and the subsequent committing of the company to expensive leases. At Cath Kidston it’s that the company’s controlling shareholder, a private equity firm, devalued the brand irreparably by cutting quality and increasing prices. In the Toys ‘R’ Us case, one of the most often-cited examples, it’s that, in addition to running the company into the ground, its private equity owners paid themselves nearly half a billion dollars in fees while tens of thousands of workers lost their jobs.

Let’s start with the most damning indictment: do private equity buyouts hurt workers? A particular challenge of picking individual transactions to evaluate private equity’s impact on workers is that the issue is then debated by anecdote rather than statistics. A study conducted in 2011 by academics at Harvard and the University of Chicago examined what happened to the employees of over 3,000 companies that were the target of buyouts over a period spanning a quarter of a century. What they found was that companies did indeed fire more workers post-acquisition. However, they also tended to hire more new employees, for a net decrease in employment of 1%. Creative destruction, then; a transformation of the workforce at portfolio companies rather than a purge.

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How about the buckling of target companies under the weight of debt imposed on them by their private equity overlords? Here, again, statistics shed some light on the matter. A review of over 17,000 private equity transactions conducted by renowned University of Chicago Professor Steven Kaplan and his counterpart at the Stockholm School of Economics, Per Stromberg, found that only about 6% ended in either bankruptcy or reorganisation. While levering up companies certainly increases the financial risk of a company, it looks like, on the whole, private equity professionals have got it right much more often than they have got it wrong.

Surely, then, the ‘asset-stripping’ charge must be fair — the industry guts viable businesses in the pursuit of short-term profits, does it not? Here, an understanding of the sources of value in a private equity transaction is particularly useful. While private equity owners will indeed look to trim down bloated balance sheets during their holding periods, collecting the excess cash, the vast majority of return is realised when the target is sold. Data from Preqin, the leading alternative assets data provider, show that in excess of two thirds of private equity exits are to either strategic buyers or other private equity firms. The term ‘strategic buyer’ is industry parlance for a company that acquires another company in the same industry to capture synergies. Neither other private equity firms nor strategic buyers, who often know more about their own industry than even the most diligent private equity firms, would attach much value to a hollowed-out shell of a company. Private equity owners are therefore heavily incentivised to devote the value-maximising level of capital to a portfolio company in order to get the best possible price for their holding on exit.

Even if one accepts the preceding arguments, however, a critical question remains. Is there any value accrued to society by the activities of the private equity industry? Is private equity, dare I say it, good for the economy? It seems that there’s a strong case to be made that it is. Looking at 20 industries in over two dozen countries across a 16-year period, a research team drawn from the Stockholm School, Harvard and Columbia found that industries with private equity activity grew 20% faster than other sectors. The researchers ran checks to evaluate whether this was simply correlation rather than causation i.e. whether the industry was simply adept at investing in industries that were already primed for growth. What they found was rather that in an attempt to compete with their nimbler private equity- owned rivals, other companies adopted the same approaches in their own companies, making entire industries more efficient.

At the individual company level, private equity plays a key role fixing the ‘free cash flow’ problem. Documented by Harvard Professor Michael Jensen, this refers to the tendency of managers to hoard excess capital, often deploying it in diversifying acquisitions. Both of these actions reduce the efficiency and value of companies. A classic example of this phenomenon is General Electric, the once high-flying conglomerate. Led by voracious dealmaker Jack Welch, GE, an industrial company, acquired such diverse holdings as a

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television network and a securities business. Its finance division was designated a systemically important financial institution, a tag attached to the very largest financial institutions in the world, whose failure might trigger a financial crisis. Attempts by a series of CEOs - three in the last five years alone - to trim down the company into a more focused competitor have done little to stem the loss of value; the company’s share price has dropped 58% over the last 5 years while the S&P 500 has risen 98% in the same period.

If not private equity then, who’s to blame for the collapse of the UK High Street? A trip down memory lane here helps. In the mid-2000s, UK retail had strong brands that were not making the most of their positions, retail wages were relatively low, and the economy was doing well – all ingredients that made these companies tempting targets for private equity. It was also clear that the burgeoning online sales segment was going to transform how people shopped. There was a clear opportunity to buy these companies, lever them up to finance market share-seeking expansions and to create an online presence to serve shoppers. Private equity firms did exactly that, closing acquisitions and then pumping cash into their new holdings. Unfortunately for the industry as a whole, pressure from online-only competitors grew, rents increased, the minimum wage went up and the UK economy stagnated. The ground shifted beneath traditional brands’ feet and the transformation strategies put in place would no longer work. The global pandemic was the final nail in the coffin for brands that had previously been limping along. Debt that had been used to fund investments meant to vault these businesses into the stratosphere became unbearable millstones around the neck. UK High Street wasn’t poisoned; it simply died of natural causes.

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International Affairs

Editor's Note

From COVID-19 to climate change, we live in a time of crisis. And as with many others, in the case of climate change, it is a global one. There is no single country to blame and no single country that can surmount it on its own. The growing international consensus is that swift decisive action is needed by as many international actors and countries as possible. As part of the overarching topic of this edition of the Oxford Strategy Review, we will cover the issue of climate change and a ‘Green Recovery’ after COVID-19 from an international perspective.

One of the main focuses will be the role of international organisations and individual countries; both from the laws governing how they distribute new technology which can help reduce emissions, and how they thwart efforts to collaborate in the fight against climate change.

Thus, one of the focuses is on the nature of international property rights and climate change. We will look at the necessity of making technology available to more people and the inherent tradeoffs which come with it. The conflicts between the global North and South, relating both to the role of technology and to the role of their leaders, populist strongmen who now haunt global efforts to combat climate change. The questions we will look at are: aren’t the strongmen justified in what they are doing? If so, why? And what could be done to change their mind, in a game of carrots and sticks? It is and will still be necessary to focus on these discussions as the challenges they accompany are growing daily. Despite a growing international consensus, there are still immense challenges to be overcome and we need to do so now.

But climate change is not the only issue we lay our focus on. Other conflicts are still brewing and in our interview with Peter Cardwell, a former Special Adviser in the Northern Ireland Office, we focus on topics ranging from the conflict on the island and the issue of short-termism in politics. Lastly, after focusing on a number of recent issues, we will also take a quick look ahead at who could emerge victorious in the political arena to be the next Prime Minister.

Mika-Erik Moeser Senior Editor, International Affairs

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Populist strongmen and climate change: A crisis of collective action Why populism is on the rise, and how the international community can combat it

Elliot Sturge

limate change, unsurprisingly, is more pressing than ever. Over the course of 2020, C approximately one million metric tonnes of the Greenland Ice Sheet melted every minute, and now may well be past the point of no return. As the crisis grows more urgent, the plans needed to combat it become larger in scale and more drastic. There is now consensus among some quarters that international action is needed, in order to adopt a coherent approach against the crisis.

Unfortunately, however, such a strategy, as with most initiatives to thwart climate change, is easier said than done. We can understand this issue as a very high-stakes collective active problem: while all of us stand to gain in the long-run from measures to protect the environment, individual governments and corporations are often not willing to foot the bill for expensive environmentalist policies while their rivals free-ride, enjoying the collective benefits without suffering the individual costs. As with any collective action problem, the obvious answer is coordination. A non-partisan organisation (often the United Nations) representing all parties introduces firm requirements for each party, so that each party is more likely to comply, safe in the knowledge that the parties around them will also comply. This approach has manifested itself in treaties such as the Tokyo Protocol and the Paris Agreement, and there has been growing optimism that the international community might finally come together to fight a common enemy.

Such optimism is under threat. To paraphrase Karl Marx, there is a spectre looming over Europe (and indeed the rest of the world), this time in the form of authoritarian populism. Trump, Bolsonaro, Duterte and a host of others are taking democracies by storm, pursuing nationalist agendas with anti-environmentalism foremost among their policies. Together, these are a lethal combination for the international environmentalist movement; they need compliance from leaders who are sceptical of climate change and highly antagonistic towards most of the international community. The most notable instance of this was former President Trump’s withdrawal from the US from the Paris Agreement. Mr. Trump was not alone, however, Brazilian President Jair Bolsonaro has also called for the abolition of environmental protection agencies and has just cut his country’s environment budget by 24%, while Poland, ruled by the populist Law and Justice party, is now the only EU country not committed to being carbon-neutral by 2050.

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This throws a significant spanner in the works of international environmentalism; if some countries cease to comply, there is less incentive for the remaining countries to do so, and our collective action problem rears its inconvenient head. We must ask, accordingly, why this phenomenon is on the rise, and how the international community can combat it. In defence of populists An appropriate place to start is from the perspective of these ‘strongman’ leaders and those who vote for them. At least when it comes to developing countries, the reasoning is to some degree understandable: the majority of the rich Western countries who are now leading the environmentalist charge got rich in a time before they had to worry about environmentalist concerns, and were able to profit through the use of fossil fuels. For those in poorer countries who now want to reach similar levels of wealth, being told that they must sacrifice their economic growth to adhere to newly-imposed rules may feel like a cruel double standard.

Additionally, it is of course easier for a rich country with a post-industrial economy, such as Germany, to invest in renewable energy and cutting carbon emissions than for a poorer developing country such as Brazil or India. Perhaps people in these countries perceive these efforts at international environmentalist collaboration, led by rich Western countries, as punishing poorer countries for not getting rich earlier. Indeed, they may rightly point out that, had they been rich fifty to a hundred years ago, they could have industrialised without any environmentalist concerns, using fossil fuels as they pleased, and in fact many of the world’s most environmentalist countries today did exactly that.

While anti-environmentalism is a trend among populist movements in and of itself, it can also be viewed as a microcosm of the backlash against international organisations, for the reasons outlined above, as well as against globalisation more generally. If a developing nation perceives the interests of rich Western countries as opposed to their own (environmentalism is a key example of this, as developing nations may see it as harmful to their development), then they may well be inclined to view international organisations, and the United Nations in particular — which was ultimately responsible for the Kyoto Protocol and the Paris Agreement — as organisations which protect the interests of rich countries at the expense of poor ones. This happens informally, through the influence these countries wield, but also institutionally; the UK, US, France, Russia and China all have veto powers at the UN Security Council, meaning that it is difficult, if not impossible, to achieve anything of substance through the UN if it is not favourable to the most influential countries. It is easy to see how smaller and less powerful countries could become disillusioned with international organisations like the UN, and their claims to be striving for a better world for everyone while enforcing the hegemony of rich countries.

This is certainly one way of looking at international collaboration, and it is clear why such a perspective would be favoured by authoritarian anti-environmentalist strongmen,

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who seek to create an ‘us versus them’ relationship between the nation community and those outside of it. It is in their interest — or at least consistent with their worldview — to portray international efforts to prevent climate change not as non-partisan causes for a common good, but rather an attempt by rich countries to hold them back and prevent them from achieving their potential. For a populist narrative — which aims to pit the ‘people’ against the ‘elites’ and persuade the former that the latter want them to fail — this is evidently not a difficult version of events to sell, especially when it often is true that rich countries are motivated more by self-interest than concern for the collective good.

Positive reinforcement The question, then, is how these richer countries and international organisations ought to go about ensuring that environmentalist concerns cut through the usual animosity between nationalist leaders and the international community. Perhaps, to combat these perceptions of hypocrisy and abuse of power, a more conciliatory approach is needed on the part of the countries and organisations spearheading the international environmentalist movement. The Paris Agreement is a good start in this respect: it is governed half by developing countries and half by developed countries, each of which has only one vote. Furthermore, it is voluntaristic, and allows each country to determine its own contributions, but it nonetheless makes demands and requires ambitions from all countries signed up to it, and it enforces itself through a ‘name and shame’ policy. It is possible that positive, rather than negative, reinforcement might give climate change sceptics less excuse to paint the international community as antagonists who want to hold developing countries back.

If the problem is that these countries feel they need or have a right to pursue their own growth and development rather than worry about what they feel are remote climate concerns, richer countries and international organisations with the resources to do so could potentially offer economic rewards and incentives for effective environmentalist policies, rather than penalties for failure to comply; in this case, it would be difficult to see how nationalist leaders would be able to stoke up hostility towards them.

Of course, there is a strong chance that this is all too idealist; the above analysis is probably assuming too much good faith on the part of authoritarian strongmen. Look at the US, whose strongman (former) President withdrew from the Paris Agreement despite the country being rich and internationally dominant, and so having no apparent reason to distrust the UN or environmentalist nations. It may well be the case that these strongmen will push nationalist anti-environmentalist narratives regardless of what the international community does, and that the populist wave simply has to be allowed to run its course. The point, though, is this: if the bottom line is cooperation (which in any collective action problem it must be), it is in everyone’s interest — as environmentalism obviously is — to make cooperation seem as appealing as possible. Without wishing to compare populist leaders to donkeys, the carrot may be more effective than the stick in this regard.

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Looser patent laws can help fight climate change How do we best incentivise people to innovate, while at the same time keeping the benefits of these innovations widely distributed, to combat climate change as effectively as possible?

Mika-Erik Moeser

ith the world only starting to recover from the COVID-19 pandemic, another much W bigger crisis is already showing its effects: climate change. While in the case of COVID-19, vaccines offer hope and show a path back to a safe and healthy tomorrow, the same cannot be said about climate change, where the worst is yet to come.

At the beginning of the rebuilding that must be done in economies across the world, it is vital to build them on sustainable foundations using clean energy, and improve efficiency in its use, wherever we can. Because of the high-tech nature of clean energy solutions, the protection of intellectual property rights has an important role to play in each stage of this process. Efforts to develop, deploy, and diffuse these technologies have been underway for many years now, with significant success. Among the most prominent technologies are photovoltaic, biofuels, and wind technologies. This can also help with the green-versus- growth tradeoff which many countries face as they transition to economies which involve less and less carbon emission.

Patents, or any protection of intellectual property, play a key role in this process, as they provide a secure mechanism for inventors to share the fruits of their labour with society while retaining the ability to profit from their investment in research and money. Such measures to protect intellectual property are always a balancing act: on one side, individual interests and incentives to invent; and on the other, the desire to do public good through such inventions. Technology is now mostly developed through innovation and private investments (In the United States nearly 70% of national R&D spending was due to private industry in 2016). Governments and lawmakers have treated this tradeoff with care, and this has led to great inventions. Even now, we can see the great payoffs that result from the investment in medical research and subsequent development of vaccines.

There has been action by individuals to make their technology more available: when Elon Musk said Tesla would not sue “against people who use our tech in good faith,” it was hailed as a great victory for society as former private property became available to all. But this is not a sustainable approach to ramping up our fight against climate change. In climate change, which affects all of society, the withholding of certain inventions from general application can harm us all. We cannot rely on the benevolence of philanthropes; instead, we

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could open patents directly for appropriate compensation. However, an overly aggressive patent-breaking regime could lead to restrained technological development, which would be counterproductive. The question that emerges out of this tradeoff is: How do we best incentivise people to innovate, while at the same time keeping the benefits of these innovations widely distributed, to combat climate change as effectively as possible? It is a rather urgent question as, in comparison to patents, the environment cannot wait for twenty years. We cannot wait until 2041 for new green technologies to become available and affordable worldwide.

But this conflict extends beyond the national level. Economies in the Global South are still developing, and their industrial growth cannot be based on the same mechanisms that brought material comfort to many in the Global North. However, scaling the carbon- hungry economies of the Global North worldwide would be a planetary disaster. As we build new economies in the Global South, we must build them on sustainable foundations, using the technologies that are or have been developed in rich nations. But as the resources to achieve this clean growth are mostly tied up as intellectual property in the rich countries, conflict ensues. If all countries had similar levels of wealth, this problem would ensue in a different way, because countries across the world would be equally able to innovate and to trade and afford these innovations, should they occur in other countries. As this is not the case, however, we need to find a global mechanism to account for this inequality.

With President Biden hosting world leaders at a virtual climate summit, the call for action on this global crisis resumes. Only recently the United States trade representative Katherine Tai highlighted the role international institutions like the World Trade Organisation have to play and how they have so far failed in doing so. While neither the Kyoto Protocol nor the Paris Agreement contain any explicit mention of patents or intellectual property rights, the key role that technological advancement will play in averting climate catastrophe is reflected in the Paris Agreement’s five-year review structure, which recognises that rapid technological progress implies a periodic recalibrating of climate goals. But we need to build on existing agreements, such as the Agreement on Trade-Related Aspects of Intellectual Property Rights, to expand the use of new technologies in our fight against climate change. In the past there have been changes in this Agreement, through the Doha Declaration, which stipulated access to essential medicines. This could be used as a basis to expand this access to ease the IP protections on important clean energy technologies to countries who otherwise could not afford it.

But despite the apparent parallels in the debates over access to medicine and access to clean energy technology, there are some acute differences between the two industries that limit the extent to which arguments for access can be shared. One key difference between pharmaceuticals and clean energy is the availability of substitutes: a

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drug that is developed to cure or treat a particular disease is likely to be one of the only medications that serve that purpose; there are unlikely to be many, if any, substitutes.

However, it is not just patents that are important. Past reports suggest that subsidies for the consumption of fossil fuels in some developing countries, such as Venezuela, Iran and Indonesia, may represent a significant barrier to the development and transfer of green technologies in these countries. Furthermore, we must avoid making a simplistic argument on the importance of patents in this context, because patenting propensities and patent effectiveness differ substantially across the various technological fields. A large range of different technologies can achieve emission reductions, and for a significant share of these green technologies, the underlying technology is mature and in the public domain. Most technological progress is expected to come from incremental improvements of existing off- patent technologies. While such incremental innovation may be patentable, such patenting will leave ample scope for competing technologies.

So a number of important steps need to be taken, at the national as well as the international level. As a start we could develop new, national policy measures to improve the distribution of the green technologies we need, to make sure that these do not just benefit the country they were developed in or other countries who can afford to use it. We need to develop a global framework through which access to such technologies can be facilitated more easily, and in which a country's wealth or level of development does not impede its ability to develop more sustainably and to continue to combat climate change.

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Peter Cardwell: “Intractable” EU needs to be “realistic” about Northern Ireland Protocol The former special adviser tells Alex Prior-Wandesforde about the difficulties facing Northern Ireland, short-termism in politics and why he still backs Rishi Sunak to be the next Prime Minister

Alex Prior-Wandesforde

etween us, David and I created Blevins’ Law, the principle that one should never “B underestimate how little any English person knows about Northern Ireland.” So wrote Peter Cardwell, a former special adviser - or ‘spad’ - in the Northern Ireland Office, outlining the term he coined with Sky’s Senior Ireland Correspondent David Blevins in his recently published book ‘The Secret Life of Special Advisers’.

In recent months, one wonders whether Blevins’ Law could also be applied to some in the European Commission. Their decision to suddenly trigger and rescind Article 16 of the Northern Ireland protocol - to enable the European Union (EU) to introduce restrictions on vaccine exports to Northern Ireland - without any prior consultation managed to unite people across all sides of politics on the British Isles in opposition, and raised serious concerns about the workability of the treaty. “Only the Pope is infallible,” commented European Commission spokesman Eric Mamer afterwards in a truly world-beating gaffe.

Now, the European Union’s legal action against the United Kingdom (UK) for unilaterally extending grace periods on checks of goods shipped from Great Britain to Northern Ireland has drawn Mr Cardwell’s ire. He is no stranger to tensions with the EU, having advised Secretaries of State for Northern Ireland between 2016 and 2018, and tells me “the EU has been pretty intractable.” While “the courts will arbitrate whether there was a breach of international law… I think [the EU] need to be much more realistic in terms of a sovereign nation, the UK, having trade between its parts.”

Though Mr Cardwell is a wholehearted unionist, he remains firmly committed to the principle that there should not be a hard border on the island of Ireland. He says that means “something had to give,” and in practice, this has proved to be a border down the Irish Sea. He is well aware of the obstacles to making this work. The current situation, he says, is a “very, very difficult” one, pointing to the withdrawal of staff in Larne checking imports on goods from Great Britain over concerns about their safety in February.

The problem must be made more difficult by the ignorance he believes many people have about his homeland. “There’s definitely a lack of awareness in terms of how Northern

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Ireland functions. It’s a complicated place, and there are a lot of people who make a lot of assumptions about Northern Ireland… who don’t really have the level of knowledge that they need,” he bemoans. “Even having grown up in Northern Ireland and having been a journalist there for many years, there was still an awful lot about the politics of Northern Ireland that I just did not know until I started at the Northern Ireland Office.”

Despite the formidable challenges, he remains optimistic that there is a way through the current crisis. In particular, he offers praise for Cabinet Office Minister Michael Gove and Secretary of State for Northern Ireland Brandon Lewis for how they have handled the situation. They “have been very good at adapting… I think Brandon Lewis and Michael Gove will find a solution and they will make sure it works for everyone in the UK(…) and also people throughout the island of Ireland as well.” he says.

And what about the unionists who fear that the protocol is undermining Northern Ireland’s place in the United Kingdom? “What I would have liked from unionists previously is a bit more involvement in terms of getting the protocol correctly done in the first place. If the DUP, for example, had been more engaged in the granular detail of what was actually going on, I think they would have been much more constructive.” However, when discussing the possibility of further violence, he is unequivocal. “There shouldn’t be, and there never is, any excuse for that.” Even over the phone, the strength of his conviction on this point is readily apparent.

For Mr Cardwell, the issue is ultimately about what people in Northern Ireland “are willing to accept”; “you can’t be heavy-handed in this,” he warns, before remarking that “these issues will resolve themselves, because they have to resolve themselves.” Regardless of how much the different stakeholders know about the intricacies of Northern Irish politics, they will surely all hope that the former spad is right about that, even if it is disappointing that this logic has not played out by now.

If the problems facing Northern Ireland need a long-term solution, one thing that becomes clear in our interview is how short-term the careers of those working in politics are. Mr Cardwell knows this first-hand, detailing in his book how he technically lost his job as a spad some three times before he was given the decisive heave-ho after the February 2020 reshuffle. The architect of his demise was none other than Dominic Cummings, a man who Mr Cardwell magnanimously still hails as a “strategic genius.”

Mr Cardwell’s experience is by no means unique -indeed, managing three-and-a-half years as a special adviser, as he did, is a relatively long time in the job - and he points out that in the 60 years that spads have existed, not one has served for longer than 11 years in a row. Spads, then, are “political mayflies.” Mr Cardwell believes this comes down to the range of opportunities to lose one’s job, from falling out of favour with Number 10 to the minister being

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moved on, coupled with how “there is no incentive for people to stay longer periods… and it’s very difficult for special advisers to go up the chain unless they work in No. 10 or No. 11.”

The short-termism isn’t confined just to special advisers: “politics, in general, is very short term. An electoral cycle is only five years and you’ve got many other elections within that, reshuffles… so there’s a lot of churn anyway. What people don’t understand, that Dominic Cummings was right to highlight, is how short-term the civil service is. People talk about the ‘permanent civil service’ as though many people are in it for long periods of time— they’re not, really. Most civil servants, certainly at a lower level, will move jobs every 18 months or two years.”

“So, there are very few people who really do build up expertise, and it is a problem… [but] unless you’re going to have 10- or 15-year terms for governments, and unless you say to civil servants that they’ve got to stay in the same jobs for a good portion of their careers - which I don’t think would be fair -you’re always going to have short-termism.”

One category of people with a reason to be grateful for short-termism in politics is aspiring prime ministers. As things stand, the bookmakers’ favourite to succeed Boris Johnson is Chancellor Rishi Sunak, who has had Mr Cardwell’s backing since 2018 when he moved as a spad from the Northern Ireland Office to the Ministry of Housing, Communities and Local Government via a very brief stint at the Home Office.

“I’ve said Rishi Sunak is going to be the next Prime Minister since I met him when he was the local government minister. The feedback that we got from people in local government, council leaders, and so on, as to how good he was, how across the detail he was, how friendly and approachable he was, but also how tough he was, and is, convinced me from day one that he is somebody who is going to go the whole way.”

Mr Cardwell rebukes suggestions that Mr Sunak’s star has fallen in the wake of the second wave of coronavirus - a wave which, according to reports, he resisted restrictions against. “I don’t think there’s any convincing evidence that ‘Eat Out to Help Out’ caused a second wave because it’s global.”

“I’m not a scientific expert and would never pretend to be one, but when you have very senior scientists saying that people going to the beach for a day, for example, is not going to create a lot more coronavirus cases, I just refuse to believe that covid-secure restaurants will have done that.” I am not entirely convinced by this: while beaches are well- ventilated outdoor spaces, restaurants are often neither of those things; but in fairness, I did not put this argument to him on our call.

Regardless, Mr Cardwell highlights the Budget as another reason to back the Chancellor. “I think he’s had a really good Budget… he can’t just keep giving away money

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obviously, but I think that the Budget showed there was some giving away money, but there were some pretty tough choices with regard to taxation as well.” Whether Rishi Sunak wants to be the next Prime Minister was not something we discussed, though many close to him have claimed that he does.

The question remains open as to when Boris Johnson will make way, voluntarily or not, for Mr Sunak or another hopeful to take the job. The vaccine rollout has steadied the Prime Minister’s ship somewhat, after spending some periods in 2020 looking rather adrift. Nevertheless, events can always trip up a Prime Minister, and there are still sizeable challenges facing the UK Government, even once coronavirus has been tamed. Reaching an accord with the supposedly “intractable” European Union to stabilise the situation in Northern Ireland is surely chief among them.

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Future Challenges

Editor's Note

The Oxford Strategy Review wanted its first publication theme to be meaningful and impactful. We determined there was no first topic more relevant than the pandemic that has changed our world for the last year and likely, for years to come. COVID has taken much from us, and sadly there are many things that we won’t get back. The last year has taught us many things, and one lesson we have repeatedly witnessed is that people are resilient in the face of uncertainty. While we don’t know what the future holds, we choose to look ahead to see opportunities for change and growth when our world reaches a new equilibrium.

Our first theme, Green Recovery, explores this new world and considers topics focussed on building an improved society. Combating climate change is vital to a promising future, and figuring out how to accomplish this is indeed a challenge. Our first article details the correlation between climate change and natural disasters. The latter are outcomes of the former and have become more frequent with the progression of climate change. Our author explores how disasters can be man-made by detailing an economics-based example that led to catastrophe in India. Our second contribution also centres on human choices related to climate. Meatless options have become more popular recently, and our contributor discusses how this, along with vegetarianism, has influenced at least one recipe company to take a stand in order to make a positive impact going forward.

Our final piece details the interesting world of tracking sustainability metrics. How can we know the globe’s status regarding climate change or, likewise, how can we determine our levels of contribution to combat it, if there are no common standards to measure against? As the world learns more about how to achieve a green recovery and how we can individually influence its direction, our last piece explores a potential option for tracking sustainability metrics at a common, baseline level.

We want to thank you for joining us on this investigative journey as we consider ways to turn future challenges into future opportunities. It is our pleasure to work towards a better future together with you all.

Jessica Swafford Senior Editor, Future Challenges

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In India, a lesson on poor environmental governance and economic loss As part of commitments towards combating climate change, India must focus on the role of environmental governance when planning for a green recovery

Kavita Upadhyay

n a winter morning, in a village in India's Uttarakhand region, Omprakash Thapliyal O stood on his verandah that overlooks the Tapovan Vishnugad hydropower project. What looked like a cloud of dust started blowing out of the narrow river valley where the 520 MW project was under construction, but the dust was actually the frothing river Dhauliganga, flooded because of a sudden inflow of ice and mud. This was on February 7, when Himalayan regions are still receiving winter snow. It is not flood season.

As the muddy waters approached the hydropower project site, Thapliyal recorded the unusual occurrence on his phone. Behind him, his wife Suman wept as she repeated, "Sab mar gae rey (Everyone is dead)." From a different spot in the same village, another resident, Kamlesh, started recording another video, while simultaneously shouting to warn the construction workers at the project site about the incoming flood. His voice did not reach the workers, and there was no warning system to alert them. In a matter of minutes, the project was completely destroyed, and the 139 workers at the site were killed. Another 53 people, mostly project workers, were killed at the 13.2 MW Rishiganga hydropower project site, on the river Rishiganga, which was hit first by the flood.

While the media was quick to decide that the odd winter flood was a result of climate change, the experts exercised caution in this assertion since no direct links could be established. Studies are currently being undertaken to trace such links, if they exist.

This is not the first time, however, that links between climate change and hazardous events have been difficult to establish. Glacial Lake Outburst Floods (GLOFs), extreme weather events, landslides caused by extreme rainfall, and floods are frequently witnessed in the Himalaya, but the exact impact of climate change as a driver is always difficult to establish, especially in the immediate aftermath of an event. Irrespective of the extent to which climate change may play a part, environmental fragility is a reality here.

Despite the controversies surrounding hydropower development, there's an evident push for it in the Indian Himalayan Region. One of the factors behind it is India's need to reduce dependence on coal while pursuing economic growth and catering to the country's

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growing energy requirements. The focus is now on resources such as rivers to facilitate production of power. With the abundance of rivers in the Himalaya, the government aims at harnessing 27,000+ MW from hydropower in Uttarakhand alone. However, hydropower projects are one of the most contentious infrastructure projects in the region. They are constructed with little understanding of the local realities of rainfall, floods, landslides, and earthquakes, and are approved without the required public consultation. Despite these existing issues, India's climate goals have resulted in a huge push for hydropower projects. However, lack of evidence for climate change linkages must not be used as a means to push for projects that may look 'green' but could have severe ecological consequences.

Like the rest of the world, India's economic growth has been marred by the COVID- 19 pandemic, among other factors. The country currently faces an unprecedented second COVID wave. At the time of writing, 300,000+ COVID cases were being reported daily. There have been at least 192,000 deaths, which the media alleges is an underreported number. There is an insufficient supply of oxygen and beds in hospitals. The emergent crisis is also a clear indicator of the economic challenges that continue to unfold.

In view of the current COVID crisis, and the continuing climate change-related challenges, green recovery has been proposed as the way forward for economic growth while also catering to climate-related goals. In India specifically, it is necessary that green recovery plans also focus on the role of environmental governance. Environmental governance in the country is top-down. Decisions, especially policy-related, are taken by the central government, which are then followed by the lower levels of administrative and governance units. Hence, the decisions taken by the central government matter the most.

Stakeholder participation is a necessary part of environmental governance, since communities are stakeholders in environmental decision-making. According to the existing norms, public participation is an essential factor under the Environmental Impact Assessment (EIA) Notification, 2006, for projects seeking environmental clearance. However, such norms where public participation is incorporated through public hearings is criticised for being merely tokenistic. The transboundary hydropower project in the Himalaya – the 5,040 MW Pancheshwar project – proposed for construction on the river Mahakali between Uttarakhand, India, and far-western Nepal was studied closely for the purposes of the present article. The public hearings conducted for the project by the Indian administration in August 2017 were a formality. The case in Nepal was no different. In India, the outraged civil society and the population to be impacted had resorted to protests when their concerns were met with resistance from the authorities conducting public hearings. There were banners mentioning the environmental fragility of the region and that such a project may cause more harm than benefit. The outrage was a clear indication that the project proponents and the government were reluctant to listen to the people and the civil society, despite there being norms for public hearings under the EIA Notification, 2006.

Tokenistic public participation was also an issue in the Tapovan Vishnugad project, which was damaged in the February 7 floods. In the other damaged project – Rishiganga – in

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2019, villagers had to move the court when they witnessed the use of explosives in the already fragile mountain region. However, the draft EIA Notification, 2020, proposed by the Indian Ministry of Environment, Forest and Climate Change (MoEFCC) during the pandemic, proposes changes to the existing EIA Notification, 2006, and further weakens the already weak public participation process. First, it proposes reducing the notice period for public hearings from 30 to 20 days. It is during this period that the public can review the draft EIA report, based on which they can raise their concerns regarding a project during public hearings. Second, it exempts many projects from the public consultation process, allowing such projects to attain environmental clearance without undergoing public scrutiny. Additionally, post-facto environmental clearance has been proposed, which is a means to legitimise the projects that start operations without the required prior environmental clearance. Meanwhile, the Indian government has said that the criticism is uncalled for, since it is a draft and not the final notification. However, the draft shows that the Indian government is headed towards easing norms to facilitate projects that may harm the public and the environment.

Despite its commitments towards combating climate change, India's push for non- green projects is evident. The 'Greenness of Stimulus Index' report published in December 2020 by Vivid Economics, an international consultancy focused on strategic economics, states that India, along with China and Mexico, are the "emerging economies'' that "have announced stimulus measures that will damage the environment". In its 'Greenness of Stimulus Index', India scores negative. The report points out that there is "substantial support for coal" in the country. However, investment of USD 26.5 billion in cleaner energy and biogas is a step in the right direction, the report states.

The government must reassess its view that fast-tracking environmental clearance may expedite projects, which may eventually result in faster economic growth. The February 7 flood, where the damages to the two hydropower projects exceeded USD 220 million, serves as a pertinent example of the pitfalls of pushing projects despite resistance from the civil society and the impacted population. Going forward, when planning for green recovery, the Indian government must not aim for faster environmental clearances to reduce the time required to assess the harms that the projects may cause. Such decisions may result in high economic losses, especially in view of the environmental disasters from factors including climate change. The government must instead strategise economic development for the environmental landscape which is faced with fresh challenges. In this regard, strengthening environmental governance is the way forward.

Kavita Upadhyay is a journalist from India, whose work focuses on the politics and policy aspects of environmental governance in the Indian Himalayan Region. She is a graduate in Water Science, Policy and Management from the University of Oxford.

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Accounting for our future As organisations of all sizes look for ways to achieve their climate targets, what could help them the most is, unexpectedly, accounting.

Professor Richard Barker & Bertie Sheridan

limate change is a hot topic. With a new president in tow, the US recently committed C to re-joining the fight against climate change, organising a two-day climate conference where they galvanised leaders to “get the job done.” Further, politicians and business leaders are looking ahead to forging life after COVID, putting the question of how to rebuild sustainably at the heart of boardroom discussions. Organisations of all sizes must do their part, and many are looking for ways to help achieve their climate targets. Unexpectedly, it is accounting - particularly global sustainability standards - that could help them accomplish this goal the most.

Setting global sustainability standards was one of the main topics on the agenda for the International Financial Reporting Standards Foundation (IFRS) late in 2020. One option proposed was the creation of a Sustainability Standard Board (SSB). The SSB would take a ‘climate first’ approach to global standard setting, and build on existing initiatives to ensure that companies clearly disclose relevant sustainability information to investors and other market participants. The motion to create the SSB gained high-profile support, including backing from the UN Special Envoy for Climate Action, Mark Carney, who stated that the IFRS “should play a pivotal role in delivering sustainability reporting standards that are in the public interest.”

How would common sustainability standards help fight climate change? Well, firstly, clearer measures of progress on climate change are desperately needed. There have been many discussions about ‘net-zero’ recently, and as McKinsey & Company suggested in their report on the future of retail, “it’s not always clear what ‘net-zero’ means.” More disclosure will help fight climate change by setting common, easy-to-understand benchmarks. For example, disclosing the volume of CO2 emitted by certain industries will show how far companies are from their climate targets, and also what steps need to be taken to reach them. The introduction of universal standards will also make comparing companies and industries easier. Without standards, companies may report selectively and inconsistently, which could be at best confusing, and at worst misleading. Standards can therefore help foster trust, because, as McKinsey acknowledges, “Authenticity is important… customers are increasingly expecting that efforts are backed up by data.”

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Global sustainability standards would create greater transparency and an even playing field, which can have immense value for investors. Once a side-issue, investors are increasingly realising that environmental, social and governance (ESG) risks could hit their bottom line, and that these impacts may not be too far into the future. For example, faulty equipment provided by Pacific Gas & Electric during California’s deadly wildfire in 2018 led the company to pleading guilty to 84 counts of involuntary manslaughter. The company later filed for bankruptcy due to the billions of dollars it owed in damages. Such cases highlight possible costs of prioritising profitability over public interest. It also illustrates why investors are increasingly putting pressure on companies to prevent and adapt to climate change.

Similarly, consumers are also prioritising sustainability more and more in their purchasing decisions. In a (pre-pandemic) IBM survey of 29,000, 80% of respondents highlighted sustainability as important, and many of them said they would be willing to pay up to 35% more for sustainable goods. This is particularly the case for younger generations, of whom around 60% would be willing to pay more for such goods. Generally, consumers are increasingly focused on where their shopping comes from, what it is made of, and how it can be recycled. Making such information more accessible and easy to understand could increasingly affect consumers’ decision making and where they decide to allocate value.

Furthermore, not being in line with public opinion shifts on this issue could have more drastic implications for business. For example, protestors caused ‘significant damage’ to Shell’s headquarters in London in 2019, justifying their actions as proportionate to what they viewed as a much bigger crime on the part of Shell by subjecting the planet to potentially irreparable harm. The six protestors were acquitted of criminal damage during their trial, despite the judge urging jurors that there was no legal basis for doing so. This highlights a growing impatience with the failure of corporations to reduce their environmental impact.

The real power of sustainability reporting, however, would be that companies recognise its significance. Towards the end of 2020, some of the world’s largest companies — including Coca-Cola, Microsoft, and Unilever — joined Amazon in their Climate Pledge Initiative in which companies committed to reaching carbon neutrality by 2040. According to KPMG’s survey of sustainability reporting in 2020, 80% of listed global companies now report on sustainability. Common standards could come a long way in supporting these efforts. What’s more, as more light is shone on companies’ environmental and social (ESG) performance, more companies will be compelled to act to mitigate future profit risks, be that from legislative or social pressures.

Of course, the Sustainability Standard Board (SSB) standards are not a standalone. Other sustainability measures already exist, including the Global Reporting Initiative (GRI) and the Sustainable Accounting Standards Board (SASB). GRI is the sustainability standard of choice for the majority of companies, providing information to a broad group of stakeholders. The SASB, on the other hand, is more focussed on investors. Both prescribe 47

standards for many different environmental, social and governance issues, which is beneficial, but lacks focus on the more pressing climate measures. The new SSB standards also have the advantage of being proposed by the IFRS, who are currently overseeing the creation of international accounting standards (by the international accounting standard board), used in over 140 countries worldwide. This lends the experience, credibility and reach needed for the SSB become the global sustainability standard of choice.

Are the SSB standards the solution to climate change? The urgency of climate change means action must be taken on many fronts. The potential impact of SSB standards can perhaps be best summarized by the adage, “That which is measured improves. That which is measured and reported improves exponentially.” These measures have the potential to influence decision making for key stakeholder groups in the fight against climate change. Of course, there’s no doubt SSB will have to evolve rapidly to succeed as our understanding increases; but they are a step in the right direction, and a much needed one.

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New kids on the blockchain: Applying the latest tech trend for good The World Wildlife Fund is using Blockchain technology to create more transparency in marine food supply chains, and it’s working

Emma Openshaw

“Not every emerging technology will alter the business or social landscape — but some truly do have the potential to disrupt the status quo.” — J. Manyika et al.

n 2008, Blockchain, the digital infrastructure behind Bitcoin, wreaked havoc on financial I and economic normalcy as the world’s first decentralised cryptocurrency took hold of markets. As the technology behind the currency became a dinner table topic, firms looked past the trend and saw the potential to apply it as a transactional tool. The Blockchain system exists around a decentralised ledger, which allows for the flow of digitised value between participating parties (or nodes) without the cost of, or influence from, third-party facilitators. There are potential applications for Blockchain everywhere, from wedding planning to healthcare logistics.

The World Wildlife Fund (WWF) is one of the few organisations utilising Blockchain technology in the conservation space, and conservation as a business is rife with complexities. There are organisations that scope multiple regions with a single mandate, varying projects that are localised, and off-shoots of larger operations as well. Conservation organisations are often non-governmental and/or non-profit, having to manage donations, funding and grants. Groups also collect and share data specific to each project. As with the WWF, there are multiple parties involved (governments, academia and other environmental and conservation groups) who require access to data which can be sensitive or require high levels of security. These nuances result in difficult operational management for organisations.

In 2019, in collaboration with and funded by BCG Digital Ventures (BCGDV), WWF backed a project called OpenSC. The digital platform is driven by one of the organisation’s key mandates — to ensure sustainable and ethically sourced food products. OpenSC utilises complementary technology to feed data into as well as retrieve data from the Blockchain base. Starting in the project’s pilot in the marine space, the source of the food products (in this case fishing boats and fisheries) would record the GPS location and time of each collective catch. It would also track the fish as it moves through the supply chain. Through this, each fish would have a unique radio-frequency identification (RFID) tag generated, tracked and verified through the blockchain platform. The tags would be linked

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to a QR code in an app for reference, and could be checked by a restaurant supplier, a fishmonger or the person eating the fish. This generated a see-through supply chain, utilising Blockchain technology’s ability to guarantee total transparency as a means to “build resilience and ultimately enable more sustainable production, logistics and consumer choice”.

This strategic implementation of technology in the conservation space serves two purposes:

(1) to establish and support a hybrid mobilisation platform model to share and monitor data and (2) to use blockchain technology as a system of accountability.

The OpenSC project relies on the collective participation of, and buy-in from multiple actors in the space. To categorise, there are the organisations involved in the project (WWF and BCGDV), the food suppliers (farmers, fisheries, grocery stores, and restaurants) and the end consumers. Mitigating the need for a facilitating body or third-party, WWF and BCGDV have used Blockchain applications — and the features that make it a unique and secure digital network — to connect suppliers and manufacturers to consumers. With the ability to add an infinite number of nodes to the network, the use of Blockchain technology ensures an increased platform value with each new participant that is added. Normally, additional participants would cause complications, but Blockchain will be most impactful when many food sources participate. Outcomes will include additional access and an enhanced awareness to reach a wide range of consumers. The transparent aspect of this platform model establishes accountability across the board, thus “mobilizing participants to act together” in a move to sustainably and ethically sourced food. As seen with the widely publicised and equally critiqued fair-trade movement, cross-collaborating with big players in the sector, while also pushing to shift the societal status quo, has the potential to both impact the sector’s revenue generation and create consequential costs, which can be a barrier to the initiative, or result in unethical practices to compensate or play into the hype.

Blockchain technology has developed a mystique about it in the public sphere, partially because people don’t understand what it is. However, applied in this way with OpenSC, it would not be possible for members of the food manufacturing sector who are involved in the project to alter or exclude points off their specific supply chains, which minimises the occurrence of any off-the-books edits and guarantees that the consumer can make a fully informed decision.

On the flip side, as opposed to Bitcoin stocks, your virtual pre-conference meeting small talk has probably included commentary on NFTs (Non-Fungible Tokens). The Blockchain bull has once again made its way into the financial porcelain shop in the form of these unique assets that can be bought and sold, but they only exist in digital form. These

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one-of-a-kind tokens have taken many shapes, from a sparkling feline gif to eye-catching pieces of digital art.

Recently this application of the Blockchain network has been used to map and track carbon credit data. Blockchain for Climate Foundation, a non-profit founded by Joseph Pallant, launched the BITMO Platform, which generates and interchanges “Blockchain Internationally Transferred Mitigation Outcomes” as ERC-1155 NFTs. Interestingly enough, one of their main points of CO2 emission tracking is the mining of the virtual tokens they utilise. Cryptocurrency platforms rely on a “proof of work” system of virtual mining to uncover new blocks that can form part of the digital, decentralised chain. The hardware required for these operations are far from energy efficient, with Pallant equating the importance of the measurement of miners’ emissions to the measurement of airlines.

Blockchain’s relatively short history is filled with these sorts of dichotomies. It is an incredibly innovative system that few truly understand and yet it has garnered an incredible reach through popular culture. With more applications of this technology being mapped onto projects in the conservation and environmental space, could this be Blockchain’s wholesome rebirth or simply a way to offset the booming popularity of puzzle-solving and NBA slam-dunk ownership?

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