FOR PROFESSIONAL CLIENTS AND QUALIFIED INVESTORS ONLY. NOT TO BE REPRODUCED WITHOUT PRIOR WRITTEN APPROVAL. PLEASE REFER TO THE IMPORTANT INFORMATION AT THE BACK OF THIS DOCUMENT. GLOBAL MACRO RESEARCH SEEKING A SUSTAINABLE FUTURE AN INTERVIEW WITH SIR IAN BOYD, FORMER CHIEF SCIENTIFIC ADVISER TO THE UK GOVERNMENT ON FOOD AND THE ENVIRONMENT. FEBRUARY 2020 R O C R A E M S E L A A R B C O H L • G IAN BOYD Professor Sir Ian Boyd was Chief Scientific Adviser to the UK Government on Food and the Environment, a post he held for seven years, and is currently a professor at the University of St Andrews. He previously served as the first Director of the Scottish Oceans Institute and as Director of the Sea Mammal Research Unit. Sir Ian is leading the move to sustainability at the University of St Andrews, chairing the institution’s Environmental Sustainability Board. As marine and polar scientist, Sir Ian spent 14 years leading a research programme in Antarctica and is a recipient of the Polar Medal and the Bruce Medal for Polar Science. He is Chair of the UK Research Integrity Office and a member of a number of other trusts and companies. He originally graduated from the University of Aberdeen with a degree in Zoology and gained his PhD at Cambridge University. He has also been awarded several honorary degrees. He was knighted in 2019 for services to Science and Economics in government. SECTION 1: Climate change 3 • Why have attitudes to climate change shifted so dramatically? • Where should policymakers concentrate their efforts? • What role does the market play? SECTION 2: Politics, policy and process 5 • What goes into deciding and setting government policy on environmental issues? • How might the growing focus on environmental issues translate into government action? • What is the role of lobbying, and how do subject-matter experts affect policy? • How do governments analyse whether to adopt a policy, on both the national and international level? SECTION 3: The future of food 8 • What are the implications of a growing population and climate change on food production? • What are the main issues facing food producers today? • What innovations or technology will have the biggest impact on food production over the next 10 years? SECTION 4: Consumption and resource availability 10 • What might make a difference to how we use resources in a sustainable way? • Is reducing consumption a realistic outcome? • How might the use of resources actually be reduced? SECTION 5: The investor perspective 14 • What does this mean for the investor community over the longer term? • What might be the impact of a lack of proactive policymaking on these issues? The focus is sharpening on the environment. Extreme weather events are dominating the headlines, green policies are increasingly influential, and activists are growing more vocal. Joshua Kendall, Senior ESG Analyst, speaks to Professor Sir Ian Boyd, former Chief Scientific Adviser to the UK Government on Food and the Environment, about issues including climate change, the dynamics that underlie government policy, and the future for food production and consumption. SECTION 1 CLIMATE CHANGE • Why have attitudes to climate change shifted so dramatically? • Where should policymakers concentrate their efforts? • What role does the market play? JOSHUA: Let's begin with climate change. This has been JOSHUA: The natural question is what action to take. There are recognised as a major risk for many years, of course, but many strong opinions out there about how to act, and clearly, it seems it is finally being recognised at the top level that government policy and policymakers are going to play a environmental issues are urgent and must be dealt with. critical role in any transition. Given the scientific evidence, For example, in January, the World Economic Forum's where should policymakers concentrate their efforts? annual risks report's top five risks were all environmental – SIR IAN: Having worked in a policy environment for a long time, for the first time in the report's history1. Why have attitudes I think policies are most effective when they're simple and quite changed so dramatically? high level, meaning they're driving systemic change and shifting behaviours in a very simple way. SIR IAN: I think there are four factors here. The first is that the evidence for climate change and environmental impacts is One of the highest-level policies you could bring in is a carbon tax, becoming stronger and stronger, particularly the underlying or carbon pricing in some form, which would drive the trade and modelling. It also suggests the implications are worse than we manufacturing system to shift to new ways of working. Such policies thought. The climate system appears to be more sensitive to need not be introduced in a sudden or abrupt way: they can be greenhouse gases than previously thought. introduced progressively over a long period of time – even decades. The impact of activism is also pretty obvious. I work on a university We've done that quite effectively at a much smaller scale. For campus, and it's clear our students feel very strongly about this. example, with waste, a small number of countries have a landfill There's a real groundswell, particularly in the younger cohorts tax, which has risen gradually over many years. It's been very, coming through, that there is a major problem here and that very effective at reducing the amount of waste that goes to they will inherit the legacy of that problem. Of course, that drives landfill. Whether that's a good thing is another point. But it shows you can drive a whole system through fiscal measures. political ambition – in my experience working with politicians, they are only ambitious when they have a constituency behind On the other hand, while highly desirable and very effective, them driving a policy. the plastic bag charge (or ban, depending on the country) has probably made little overall difference to the use of plastics or I would say the third thing is that much more work has been done their impact on the environment. By contrast, taxing raw materials on the pathways to adaptation or mitigation, which means we produced from fossil fuels, or of a certain type of chemistry, understand a lot more about what needs to be done. The UK would create a market incentive to develop alternative and Committee on Climate Change, for example, has done a lot of very more degradable forms of plastic. good work on this2. We're in a better position to understand what the costs are, and the trade-offs associated with the things we need to do. The government can also regulate, and I think it needs to do so to provide a level playing field for the development of markets – for Finally, I think many of the negative voices around climate change example, for environmental or green bonds. And where there are are fading into the background. They are much less influential. market failures, the government needs to address those too. 1 Global Risks Report 2020, World Economic Forum. Available at https://www.weforum.org/reports/the-global-risks-report-2020 2 For more information, please see: https://www.theccc.org.uk/ 3 JOSHUA: What role does the market play in effecting change in this area? SIR IAN: It's crucial these developments are delivered through the market, because we need a shift in the structure of the economy. Innovation in many forms is going to sit at the heart of solving the current problems and environmental challenges. This includes technical innovation, such as in energy storage, but it will also include innovations in how capital is diverted to solve these problems – such as how we incentivise and reward people for their contributions. In the end, human imagination – which is what has got us in to the current difficulties in the first place – is going to have to power us out of the difficulties and top-down, command-and-control, approaches are proven not to be good at unlocking this resource. This is where the market comes in. However, the market in an unsupervised form can produce odd and extremely damaging outcomes. This is where government intervention is needed, either to regulate for certain strategic outcomes or to address market failures when they happen. For example, we need to regulate so that we do not solve the problem of reducing carbon emissions by reducing air quality. Both improving air quality and reducing carbon emissions need to happen simultaneously. Also, the risks involved in delivering some major infrastructure and research investments to shift markets are often too high for the market to bear, and government would need to step in to drive change. As an example over 60 governments have set the target of getting to net zero emissions by 2050. This is a strategic goal, but to achieve it, the institutions sitting within the economy are going to have to play their part. This may mean changing business models to cope with the transition, but it may also involve buying carbon offsets. However, there are just not enough offsets to cater for everybody’s needs. By setting the strategic goal, government has established the background ambitions which call for financial instruments to be developed to supply offsets to cater for rapidly rising demand. We are still a long way from achieving such a market, but it's sorely needed. I think government needs to come together to work with those who are creating those sorts of financial instruments – such as green bonds – to come up with clear criteria by which environmental benefits will be judged.