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2018 in Review: sustainability trends that moved us

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2018 was quite an eventful year for those of us immersed in the sustainability discourse. From a corporates to an individual level, a majority of us worked towards righting the wrong metrics of our investments and lifestyles.  Climate change risk became material to investors and mitigation and adaptation became a key policy issue across the globe a at state and an international policy levels.  Weather devastation took a toll on us; from South Africa being at risk of “Day Zero” – running out of water to ravaging typhoons in Asia and Hurricanes in America and closer home- floods turning roads temporary to rivers in Kenya.

The fate of the Planet- 12 Years Left 

The alarming message by IPCC that we have 12 years left to avoid the potentiallydevastating and irreversible impact of climate change wasa “wake up” call for action tolimit warming to 1.5ºC  The report cautions irreversible damage on the planet if global warming is not limited to 1.5 degrees Celsius.

“If greenhouse gas emissions continue at the current rate, the atmosphere will warm up by as much as 2.7 degrees Fahrenheit (1.5 degrees Celsius) above pre industrial levels by 2040, inundating coastlines and intensifying droughts and poverty. The estimated $54 trillion in damage from 2.7 degrees of warming would grow to $69 trillion if the world continues to warm by 3.6 degrees and beyond” 

The report caution that failure to keep temperature increases below 2°C would increase the risks to human well-being, ecosystems and ultimately sustainable development. Some of the eco systems that support the millions of people are dying. Declining insect population, and dying of coral and kelp forest and the threat of extinction of some mammals like the white rhino are some of the 2018 trends that we had to deal with.

The Ocean Dilemma – More Plastics than Fish in the Sea

A McKinsey report in 2015 identified a worrisome trend in plastic waste where a majority (60%) of the approximately 8 million tonsof plastic waste leaking into the world emerge from handful Asian countries- China; Indonesia; the Philippines; Thailand; and Vietnam. UNEPestimates the negative externality of plastic production at USD 40 billion annually —equivalent to the GDP of Tunisia and as per the International Monetary Fund (2017) – exceeding the plastic packaging industry’s profit pool. Ellen MacArthur Foundation cautions;

“In a business-as-usual scenario, the ocean is expected to contain one tonne of plastic for every three tonnes of fish by 2025, and by 2050, more plastics than fish [by weight].”

Not all is gloomy, as iconic multinationals in the food sector that have been identified as a contributor to plastic menace have launched ambitious initiatives to right their plastic wrongdoings.  McDonalds and Coca-Cola have committed to 100 percent recyclable and certified packaging materials by 2015 and 2030 respectively. The interventions are in response to increased global concern over the prevalence of plastic waste.

Oil Companies Acknowledge Climate Change Impact on their Portfolio

Oil Companies remain multinationals with the highest global footprint. Consequently, they arguably yields the largest environmental footprint. For decades, the oil companies have reaped profits year after year while simultaneously contributing to global warming. Nevertheless, the turnaround in the oil sector is stunning and the companies are realizing that even the fossil fuel sector is not immune to climate change. The oil companies admit suffering fromeffects of climate change forces. Oil giantChevron Corporation, the largest oil and gas producer in the Gulf of Mexico, lost $1.4 billion because of reduced production and added costs for repairs and maintenance for both offshore and onshore facilities  as a consequence of hurricanes  Katrina and Rita.

Take a case ofØrsteda Danish Oil and Natural Gas multinational that is now a leading renewable-focused power utility with an installed offshore wind capacity of 3.9 GW. The move to transition to renewables not only yielded reduction of carbon intensity by an equivalent of half of Denmark’s entire CO2 reduction in 2006,but as well, Ørsted’s installedoffshore wind capacity of 3.9 GW could meet more than 10 million people’s annual power consumption. The move was a win for environment and stakeholders as Ørsted’s net profit increased by 53 percent to $3.37 billion in 2017 compared to 2016. Ørsted continues to disinvest in coal, oil and gas business but aggressively investing in renewable energy.

HAVE A SUSTAINABLE 2019

The year 2018 had mixed outcomes, but the outcomes already set an agenda for 2019- reduce environmental footprint. So, as corporates define their missions explicitly around sustainable investment and align around value-based business models, and countries continue to invest in mitigating and adapting to climate change, we can only imagine how this could play out in 2019

Not to innovate is to die

That is the harsh message we have to give to the agricultural sector in Kenya. Kenya produces 1,391 kg of cereal per hectare of agricultural land, ranking 141stout of the 177 countries measured. To compare, the top 10 countries produce at least 7,000 kg cereal per hectare[2]. A whopping fivefold difference.

While the agricultural sector employs 40% of the total population, it fails to feed the country. Kenya needs to import food in order not to die of hunger; a grand total of 100 billion Kenyan shillings have been imported in the first half of this year[3].  If Kenya wants to stay competitive, it needs to innovate. 

Modern Agriculture is the redeemer for Kenya

Modern agriculture consists of mechanization, digitalization and new growing practices. However, before we cross over to modern agriculture, we need to set some things straight: agriculture is not the easiest in this country due to its arid regions, and because of its colonial past, Kenyan farmers have focused on the European cash crop market- which is not tailored to the current market conditions. Fortunately, its past does not matter, Kenya does not need to keep itself in this position. No, an innovative industry and bright minds can transform Kenya intothe best ranking countries due to its fertile grounds and natural capital it has in stock. 

Mechanization can make hard work light and increase the time spent on things other than ploughing the land or cultivating crops at the end of the season. Irrigation, for example, is a practice that is still not employed everywhere, even though it increases productivity substantially. Moreover, irrigation reduces the risk of crop failure. The capture of rainwater for the dry season should thereforebe implemented. 

Digitization is also a key strategy to increase productivity according to the top producers of agricultural products. For example, a key innovative player incubated by KCIC is Ujuzi Kilimo that develops technology that allows farmers to measure key growing parameters, such as the nitrogen or moisture content of the ground. This information, in turn, allows farmers to precisely apply fertilizer or moisture only where needed, avoiding over-fertilization or giving more nutrients than necessary. Data-driven farming is the future for feeding the growing population of the world, and Kenya can hop on to this trend by importing new tech or developing their own tools to make food more affordable. 

Growing capacities

New growing practices that are being developed by researchers have shown to offer great potential to the whole market and to specific niche sectors. One of them is greenhouses; they offer a protected space for plants to grow while allowing for the direct control of the needed growth conditions. One can adjust the temperature, humidity levels, lighting, water, CO2levels, nutrient supplements, and pesticide controls. As the future of farming is science-based, greenhouses offer farmers the best options to do so. What Kenya needs is to upgrade the current horticulture sector and educate new researchers to work together with the brightest in the world to raise Kenya’s competitive edge. 

Above is a picture of greenhouses in The Netherlands, a top ranking country and second-largest food exporter in the world with a land mass just 1/15ththe size of Kenya. ©George Steinmetz.

Not only will new technology and practices make Kenya competitive, but new economic structures will have to form.  Since small shareholders have too little capital to invest in improved practices, either large investors will need to pitch in or smallholderscan all pitch into a community-driven project. The latter option could be even better for them, given that they can all invest in new technology and share their best practices among each other. This also decreases costs ofgettingtheir produce to the market, since they have more power and resources at hand. 

The way forward

There are plenty of problems at hand in the agricultural sector in Kenya. However, by following market conditions, working together and employing the brightest of minds, Kenya can transform itself into one of the top-producing countries in the world.  All stakeholders- from the government to investors and from smallholdersto the supply chain- need to work together and force each other to become competitive again and reduce costs while increasing profits for everyone. We should not need to import food- we can make it our own and even plentiful more to sell on the world market. 

“Not to innovate is to die.” A famous sentence coined by Freeman, a leading economist. 

[2]https://www.theglobaleconomy.com/rankings/cereal_yield/

A case for sustainable urban planning in Africa

Everybody who has been in any of the African cities and the associated traffic always has questioned themselves: “why does everyone else need to move to the same place as I do…” The congestion-plagued cities are not a one-of-a-kind case but are certainly among the world’s worst with respect to traffic. This has not only caused a lot of losses in terms of leisure and working time, but also a lot of traffic-related pollution and resources. This pollution causes climate change, but also a health hazard to the city populations.

Rapid urbanization in Africa has caused a flood of people that all need to commute from A to B. Moreover, the fact that Africans have become richer over the years have caused a rising trend towards car ownership and use. The worst of it, all old cars that are banned in Japan or in Europe and exported to Africa, with bad pollution as a result. Finally, the road infrastructure has not kept up with this huge rise in passenger-miles. To confront all of these issues, African cities need to develop better urban planning systems.

Sustainable forms of public transportation

Building more and more roads is a solution that is certainly viable to a certain extent. However, this requires careful planning and prediction of where passengers will come from and would like to travel to. Not only this but also for the future, since infrastructure will last for at least thirty years to come.

An old but not forgotten strategy is opting for a multi-modal transport system. Multi-modal means that various options of moving around are used when travelling from A to B. The Dutch are famous for their bikes and many bike-miles throughout the year. However, the strength of bikes is amplified if it is combined with public transport: Cycling towards a train or bus station, travel a longer distance, and then either walk to work or hire a single-use bike. In this way, up to four modes of transport are used, each efficient in its own area.

For cycling to work on the continent, safety should be inherently designed into the cities. Raised curbs, protected areas and car-free zones are options. In this video, it becomes clear how bikes can work together in shared spaces. You will see pedestrians, cars, buses, bikes and trams, all in one junction safely operating between each other.

Another picture of Nairobi’s old but quiet streets – Mama Ngina Street – Source: Wazua.com

Creating better city zoning in Africa

The solutions above are focused on addressing the problems of congestion and still force the same A to B distance to work or home. As one might have noticed, during the morning a lot of traffic seems to be going towards the centre of each city, but during the evening, everyone is trying to leave town again, resulting in traffic jams towards the other way. The root cause of this problem is thus the mismatch of living spaces and working spaces.

Zoning is the magic solution that can offer a way out of this traffic hell for many inhabitants. In cities, most space is solely allocated to businesses, hotels or government buildings. You will find very few Africans living in the central district of the cities as the case is for most European cities.

In Kenya for instance, 1987, 2006, and 2012, zoning policies were developed by the Nairobi City Development Ordinances and Zones guidelines. However, these have failed to address the rising population that the city of Nairobi is faced with. Other options are building new industrial and economic centres, closely linked to the cities through highways and railways, allowing rapid movement between the centres, while offering good living spaces in both cities.

Mixed industrial, commercial and living zones can become an autonomous identity. People living inside would not be needed to move out of town and could just shop in the neighbourhood, work at the office next street and live in a green and affordable neighbourhood- without worrying about traffic and air pollution.

The way forward is two-fold. First, African cities need to provide their citizens with better modes of transport, promoting more sustainable alternatives, while allowing other modes to work seamlessly with them. Secondly, urban planners in Africa should think hard about zoning and the way to plan cities. Why do we need only one city centre, when we can have multiple connected hubs where people work, live, and relax? In this way, we can move towards more sustainable cities where it is healthy and fun to live while saving a lot of time and resources currently being spent on traffic.

Environmental management systems- another fad, not a panacea

Environmental management systems can be viewed as management of those activities, products and services of an organization which have an impact on the environment. The ultimate aim of corporate environmental management must be to operate in a way which improves their environmental standards. However, the problem that many organizations face is: what constitutes an environmental standard? How do we measure our impact on the environment without bias?

The intrinsic complexity associated with environmental issues means it is difficult to understand all the feasible actions available to a firm for reducing its impact on the environment. Such complexity makes it hard to accurately assess the real environmental achievements accomplished by a firm.

Confronted by pressure from stakeholders such as the public, environmental groups, and government legislation, many firms have adopted environmental policies for compliance purposes. Such policies can be viewed as a general guideline that companies wish to aspire to. However, they provide little clarity as to how firms actually interact with the environment in their daily operations and are often cherry-picked to look favorably upon a firm’s activities.

Environmental management system standards such as the EU eco-management and audit scheme and the international standard ISO 14001 have been developed to provide organizations with a framework to implement an environmental management system in their activities. An environmental management system (EMS) consists of a number of interrelated elements that function together to achieve the objective of effectively and efficiently managing those activities, products, and services of an organization which have an impact on the environment.

A key element of ISO certification is to promote trust and accountability to stakeholders. This is typically achieved through an external audit, conducted by an independent, third party actor. However, despite the widespread prevalence of auditing systems, notable ‘gaps’ still exist between theory and practice, particularly regarding auditor impartiality. This can be partially attributed to the direct contracting and payment of ISO auditors by the organizations they audit. Rather than serving as a neutral third party figure, these auditors cater to a ‘customer-supplier’ type of relationship, mimicking that of a hired consultant. Such a relationship can contribute to an aura of rationality (rationality? is this the word you wanted to use here?) in which their information is obtained behind closed doors. Thus, while sustainability reports and audits are, in theory, conducted in order to disseminate information to stakeholders, such information may be skewed to favor corporate interests due to auditing biases.

The use of vague terminology within the EMS is another problem that is hard to ignore. There are a tremendous number of actors involved in environmental management schemes. Over 130,000 organizations around the world have been ISO certified. In this light, the scope of differing perceptions and definitions of environmental performance is vast, hence affecting the overall goals and actions of certified facilities. The measures taken to achieve established goals will depend on perceptions of the EMS and its role in a firm. Additionally, while facilities being certified for ISO 14001, for example, are required to establish environmental targets, the nature of the targets fails to be addressed. In essence, the effort put forth by individual firms will vary drastically depending on their interpretation of increased environmental performance. In this respect, even incremental changes are deemed perfectly permissible under ISO guidelines as long as a firm is making ‘headway’ on a goal.

Again, for many organizations, the implementation of an EMS is not primarily aimed at improving its legitimacy and internal practices, but it is often a symbolic action aimed at boosting external legitimacy.

Another drawback to EMS is the loose regulations regarding the integration of EMS, which may lead to decoupling between real organizations and the organizations prescribed by the EMS. Instead of adopting standards that actually lead to environmental sustainability, organizations tend to adapt the EMS to the standards that are already in place. Thus, there is a real danger that the daily activities are somewhat disconnected from the standards set by the EMS. Furthermore, voluntary agreements are a self-managed process. Therefore, its success depends largely on the management commitment present within an organization. Many organizations fail to achieve their sustainability goals due to lack of buy in from the management who might be unaware of the EMS program.

EMS does not establish performance standards and it doesn’t measure environmental performance. What it does is to assist organizations in reaching a target of increased performance. ISO 14001, for instance, is more concerned about processes than actual outcomes. Also, a company could, if it so wished, relocate to less restrictive nations and become an ISO 14001 certified company. It is also worth noting that companies aiming for ISO certification could set their own goals and targets. This could also be exploited by a company by setting easier goals which are achieved and subsequently stating to stakeholders their achievement of ISO 14001 certification, for instance.

Finally, the only element of ISO 14001 which is made public is the environmental policy statement. This lack of transparency is a major disadvantage of ISO 14001, since there is no requirement to make public any information about an organization’s environmental impact.

While acknowledging that self-standing instruments cannot be expected to achieve significant behavioral change, concerted effort should be made at various levels to enhance the effectiveness of Environmental Management Systems such as ISO 140001 and EMAS. The lack of clear guidelines or prescriptions and the overall ambiguity of the systems based on voluntary instruments are characterized by contextual conditions which dominate the process and where outcomes largely depend on which actors are active and most involved. How are the consumers with a lean towards sustainable products to be convinced to buy from certified firms with no real environmental outcome? These are some of the question we should ponder upon as we seek to improve the effectiveness and credibility of environmental management systems.

The plastic pollution problem: lets change the tide

The rich and enormous natural resources of the Earth have been amongst the most strategic assets for both human well-being and development. Our oceans and its sea life are considered to be one of the key resources that make this planet habitable for humankind. Moreover, in Kenya, for example, are our marine and coastal environment vital for economic, social and cultural contributions as these regions are sources for fisheries, food security and a growing stream of tourism.

Currently, the number of endangered animal and plant species in the world is higher than ever before. Our oceans are facing threats of resources depletion and climate change, and the list of ocean animals that are endangered and on the edge of extinction has never been this long. Further damage to the natural resources and a further decrease in biodiversity due to overexploitation of resources, pollution and climate change, will not only impact businesses and thus Africa’s further economic development, but it will also have far-reaching consequences on the quality of life of the people.

A plastic pollution problem 

In addition to these human-caused problems of overexploitation and climate change, our society has been facing another problem. Over the past 50 years, production and consumption of plastics have continued to rise globally. In addition, the UN states that 8 million tons of plastic waste is dumped into our oceans every year. This pollution has been causing serious consequences for marine life. All over the world, more and more animals are being washed ashore, who died because they got entangled or suffocated in the floating plastic. It is even stated that by 2050, the problem will reach a point when plastic will outweigh fish in our oceans.

Plastic is not only a threat to sea life, a recent study has also revealed that plastic pollution has ended up in the human food chain. In the water, the plastic is broken down in micro-plastic particles, which eventually end up in our diet, be it through fish or tap water. The consequences of this phenomenon are yet unclear, but it might be obvious that this does not contribute to our health and well-being.

That action on tackling this problem is required, is finally getting more attention worldwide. The UN Sustainable Development Goal 14: Life Below Water, encompasses ten targets focused on conserving and sustainably using the oceans, seas and marine resources for sustainable development.

A solution to the plastic pollution

Despite that this plastic pollution problem is growing, various developments and actions have been taken to beat this problem and address SDG 14. Whereas the EU just voted last month to ban single-use plastic by 2021, the Kenyan government took drastic measures in August 2017 and imposed a ban on all plastic bags and set high fines to people breaking this law.

Not only the governments are taking action, businesses realize that addressing this plastic problem is creating a win-win situation. Adidas, for example, has been partnering with an organisation that collects plastic from the oceans, resulting in a launch of trainers that are made out of recycled plastic. Next to that already 1 million shoes from recycled plastic have been sold so far, the company now takes the combat against plastic further by committing to only use recycled plastics in all their products by 2024.

Next to larger businesses, also entrepreneurs have acknowledged this problem and few have taken this opportunity to come up with inventive solutions. Six years ago, at the age of 18, the Dutch Boyan Slat came up with the revolutionary idea to build an enormous floating barrier that could collect ocean litter. After a successful crowdfunding action, his company The Ocean Cleanup was founded.

This year, at the beginning of September, six years later, his ideas came into action after years of research and testing. Currently, his Ocean Cleanup System 001 is floating in the Great Pacific Ocean and the largest ocean litter collection process has started. Despite the challenges he and his team are facing since the first results have come in, The Ocean Cleanup team is determined to combat the setbacks and believe that they can achieve their mission.

Another great local example of an entrepreneur that came up with a win-win business model in which trash is turned into treasure, is the KCIC incubated start-up Mega Gas that creates clean cooking fuel out of plastic.

Individual actions matter

Nevertheless, you do not have to be an entrepreneur or a business manager to be able to make your contribution to reducing or tackling this problem. Individual actions, large and small, make the difference. Stop buying that plastic lunchbox every day, chose to carry a water bottle and refuse plastic straws, because together it will make a difference and the change starts with you.

Combating Climate Change: Hope Lies Ahead

What does 2019 have in store for the global climate?

Weather patterns in countries around the world caught many by surprise. Kenya, for example, usually starts of the year with high temperatures. Surprisingly we have had a bit of light showers, cloudy skies and some chilly breeze. This is just an example of the manifestations of climate change we will be experiencing, all caused by human activities.

The Reality

Not only weather patterns have changed over the decade. Sea levels have been rising, glaciers have been melting and greenhouse emissions are at the highest level in history. 2018 recorded extreme weather occurrences globally, from wildfires in the US, typhoons in South East Asia to drought in the UK and heat waves in Northern hemisphere that caused wildfires in Sweden. Scientists went ahead to call for curbing measures warning that the temperature is steadily rising. The heat wave was the fourth hottest wave ever recorded. Climate change has spared no country. The effects being felt by people across the globe, leading to disrupted national economies, rise in cost of living that is still costing both communities and countries.

The UN Intergovernmental Panel on Climate Change recently released a report signalling that we have 12 years to mitigate climate change. The report tried to weigh what it would look like for us if temperatures rose to 1.5C. Nevertheless, the urgency of why we should maintain the global warming temperatures below 1.5C. seems to have not been grasped yet. As an individual, you will not notice the drastic change of temperature. However, the changes soon will be felt widely. It will further exhibit the mass die-off of coral reefs, rise in sea levels, extinction of some species both on land and in water and in some cases cause an increase certain species.

Steps taken to Mitigate and Adapt to Climate Change.

Nevertheless, not all is doom and gloom, and most of the time the negative news on sustainability overshadows the positive happenings. Since 2015, global leaders have been working on achieving sustainability on 17 different pillars, framed as the Sustainable Development Goals. SDG 13: Climate Action showcases combatting climate change, so that our planet may incur fewer pessimistic impacts on frequency and intensity of extreme weather events, on security of resources, ecosystems, biodiversity, food security just to mention a few.

To further put SDG 13 into action, all countries globally signed the Paris Agreement at COP21 in 2016. At that time, countriesagreed to limit the global temperatures below 2 degrees Celsius. When President Trump decided to withdraw from the Paris agreement 2017 it was, and still is, feared that his actions may in the future affect the achievement of SDG 13 due to the USA’s dominance in the world economy, particularly in the manufacturing sector. The industrious country has recorded high Co2 gas emissions this year after three years of decline.

Despite the fact that Trump withdrew from the Agreement and the countries’ emissions increased, his actions caused a reverse effect and did not stop various states from implementing policies to help mitigate and adapt to climate change. U.S leaders came together to form the U.S Climate Alliance after President Trump’s withdrawal from the Paris agreement to continue upholding the objectives of the 2015 agreement.

But not only leaders in America have taken action. Last year, China showed the world that they are determined to reach the targets, as they took a huge step by deploying 60,000 military personnel to reforest land on 6.66 million hectares of land. This was in addition to the reforestation of 338,00 square kilometres reforested in the past 5 years.

Costa Rica took a progressive step  by being the first country worldwide that committed to become completely carbon-neutral by 2021, in addition to the fact that the country has been running on renewable energy sources for 99% since 2014. New York plans to divest its pension funds from fossil fuels to pull $5 Billion on investments from oil, gas and coal.

Israel pledged to eliminate the usage of coal, gasoline and diesel by 2030. The Energy Minister citing that within 12 years Israel will be fully relying on natural gas.

The pace of quickening adaptation efforts is increasing at a fast rate. The world has shown that it has the technology needed to combat climate change and the combination of wind and solar energy to pass 1000 gigawatts equivalent to 1600 Coal plants induces the certainty of this conclusion.

In Africa progress has been made on climate change mitigation. Here in Kenya, county governments such as Machakos County have integrated the adaptation measure into the County Government Development Plan creating awareness to the community on the importance of mitigating and adapting to climate change.

It is clear that economical scalable solutions exist to enable countries to take a step toward achieving resilient and low-carbon economies. Therefore, despite the setbacks and the negative news that dominates the headlines,we should not lose focus on the positive things that are happening out there. Let’s make 2019 the year that we focus on that, and keep striving to make things better.

Yes, we can grow the economy while fighting climate change. Just look at California

One of Trump’s main arguments for repealing Obama-era environmental regulations is that they hurt economic growth.  In addition to his recent rollback of vehicle emissions standards, Trump now wants to essentially make it easier for companies to release methane into the air in the name of saving the oil and gas industries. However, as industries whose profits reach billions of dollars per year, they are not exactly in peril. If Trump really wanted to see growth and innovation in the country, he would look within his own borders and follow the example of California.

Groundbreaking climate change legislation in California 

The fifth largest economy in the world, the state of California has actively been pushing for more renewable energy. California committed to following the Paris Agreement when Trump decided to pull out of it, and in doing so has recently enacted powerful legislation to curb greenhouse gas emissions. Just last week, Governor Jerry Brown signed an executive order calling for the entire California economy to become carbon-neutral by 2045.

According to the Paris agreement, the whole world must become carbon-neutral by 2060-2070 in order to keep global temperature increase below 2°C; by pledging carbon-neutrality by 2045, California is showing itself to be a leader in fighting climate change and can provide an example for the rest of the world to follow.

California reduces emissions while boosting growth

Such bold steps to lower greenhouse gas emissions are happening as the state’s economy has been growing. Specifically, since 2001, emissions have gone down by 12% while the state’s GDP has grown by more than 80%.

The renewable energy sector in particular has been thriving.Solar energy alone employs nearly 250,000 Californiansand in 2017 provided 10% of electricity in the entire state– up from 0.5% just 7 years prior in 2010. This is on par with nationwide trends which show that most new jobs in the energy sector are in renewables.

Despite population and job growth, statewide demand for electricity has not risen at quite the same rate. From 2000-2016, population rose 15%, job growth increased 13%, while electricity consumption only grew by 9%. In fact, California has the lowest per capital electricity consumption in the state. 

Furthermore, both the public and private sectors have made investment in green technologies a priority. From 2007-2009, the state granted the highest number of patents for clean tech in the whole country. Additionally, Californian venture capitalists have demonstrated their interest in renewable energy, even though it is typically assumed that venture capital is ill-suited to the long-term nature of such investments. These investments have allowed for innovation in the field of clean energy technology. Added to the presence of Silicon Valley- a hub of cutting-edge enterprises and skilled labor-, it has allowed the state to develop energy sources such as hydro, wind, and solar.

Thus, reducing greenhouse gas emissions not only does not spell death for the economy but can in fact spur it. 

Move forward, not backward, to realize economic growth

It is clear that economic growth is driven by innovation. Old, polluting energy sources may have boosted growth when they were considered new in the 20thcentury, but in 2018 it’s time to approach the economy with a 21stcentury mindset. While Trump might be worrying that more regulations hinder economic expansion, places like California have shown the opposite to be true. Policy that strives to mitigate climate change can in fact spur on innovation as entrepreneurs and established businesses seek to stay competitive and comply with the law.

Earlier this year, California surpassed the U.K. to become the 5thlargest economy in the world. With a GDP of more than $2.7 trillion, policies such as Governor Brown’s are key to confronting the catastrophic effects of climate change while enhancing growth. If only Trump would realize that, perhaps the rest of the country could be on the same path to sustainable prosperity.

Curving out a Sustainable Future with Green Bonds

As the consequences of global warming are multiplying across the globe, green bonds have become popular among several nations as a leading means of mitigating the impacts of climate change in accordance with the Paris Agreement. Africa has not been left behind in this wave of initiatives aimed at building green bonds as an enabling path towards enhancing the transition to a sustainable and prosperous economy.

In Africa, Nigeria issued its first sovereign green bond in December 2017- the first one in the African continent. In Kenya, the Green Bond Program which was established to develop a domestic green bond market is on progress under the leadership of the Kenya Bankers’ Association, Nairobi Securities Exchange Climate Bonds Initiative and Financial Sector Deepening Africa, in collaboration with the Dutch development bank FMO and the International Finance Corporation.

According to Climate Bonds Initiative, the green bond market has grown significantly in the past few years, with the market commencing in 2014 when USD37Bn was issued. In 2017 issuance reached USD162.5Bn. This momentum has been persistent with over USD419Bn in green bonds currently outstanding. There are projections for issuance to reach USD200-225Bn in 2018.

Before delving deeper into what the future holds for green bonds and other sustainable finance instruments, let us examine the meaning of green bonds. Climate bonds are fixed-income financial instruments created to fund projects that have positive environmental and/or climate benefits. Overall, green bonds are regular bonds with one distinguishing feature: proceeds are earmarked exclusively for projects with environmental benefits, mostly related to climate change mitigation or adaptation but also to natural resources depletion, loss of bio-diversity, and air, water or soil pollution.

Green Bonds in Africa

Johannesburg Stock Exchange (JSE) has an established Green Bond segment established  to unlock the investment potential of green infrastructure, technologies and services. Growth point Properties was the first corporate in South Africa to issue a green bond in JSE in March, 2018. The R1.1 billion ($94 million) Green Bonds issued by Growthpoint will be used to fund the green buildings and green initiatives in South Africa.

The Kenya’s National Green Economy strategy postulates that Kenya needs approximately $24Million to kickstart the transition to sustainable economy in sectors such as afforestation, renewable energy and public transport. The Green Economy Strategy and Implementation Plan (GESIP) identifies green bonds as one of the channels for raising funds required to support this transition. A new study commissioned by Strategic Business Advisory (SBA) in partnership with the Kenya Bankers Association revealed that Kenya’s demand for climate-friendly bonds will accrue to KES 91 billion in the next five to 10 years. This opportunity will attract major investments in transport and agriculture with the biggest green-financing demand within that period being bus rapid transport (BRT) in Nairobi and Mombasa with the projection that it can raise up to KES 36 billion.

Benefits from Green Bonds

Despite the increase in uptake of Green Bonds across Africa and the world at large, little is known about the impact of these bonds. Do they have the ability to yield positive environmental results? Are they beneficial to the issuing companies? Well, I can confidently respond to these questions with a conclusive yes.

In her analysis of 217 corporate green bonds issued by public companies globally from January 1, 2013 to December 31, 2017, Caroline Flamer discovered that they lead to positive stock market reaction, improved financial and environmental performance, an increase in green innovations, and an increase in stock ownership by long-term and green investors.

  1. Improved financial performance to the issuer

Firms that offer green bonds realizes a 2.4% increase in long-term value as measured by the ratio of the firm’s market value to the book value of its assets. Again, issuers of green bonds attract more improvement in operational performance as measured by the return on assets as compared to firms that issue non-green bonds.

  1. Improved environmental performance 

Many studies firms tend to easily balance financial returns with environmental benefits after issuing green bonds. A recent study shows that the environmental performance score of the issuers rose 6.1 percentage points on the Thomson Reuters’ ASSET4 scale. The firms also indicated a reduction of more than 17 tons of CO2 per $1 million of assets. Moreover, this enhanced their reputation which attracted strong investor demand.

  1. Increase in ownership by long-term and green investors

Corporate green bonds attract investors who are concerned with  the long-term and sustainability. Issuers of green bonds are more oriented to the longer time horizons hence benefiting from the shares of long-term investors. The Green bonds also enables such investors to benefit from hedging against climate policy risks.

Overall, there are indications everywhere that green bonds trigger a positive market response, helps investors to balance financial returns with environmental benefits, satisfy Environmental, Social and Governance (ESG) requirements for green investment mandates, improves investor diversification and attract buy-and hold investors.

Despite the significant promise held by green bonds as an emerging impact investment instrument in corporate finance, there are some barriers that need to be addressed to see its growth in Africa. The need for an enabling policy environment in majority of African countries is a concern, inadequate data on sustainable investment opportunities and technical know-how is a key hindrance to the scaling up of the green bonds market in the continent.

Social or Mission-Driven Enterprises: The Solution for Africa’s Problems In 2019

Private sector and market driven interventions will definitely play a key role in the economic development of the African continent. The traditional private sector intervention has played a significant role in the development in Africa especially where the business models allows for benefit sharing with other stakeholders. 

The matter is, however, complicated when it relates to provision of social or public good. In most instances the citizens’ as well as the private sector has expected this to be provided by the government. Unfortunately, this has not been the case due to limited resources. 

To bridge the gap, the emergence of social/mission-driven enterprises has been on the rise and have a huge potential in moving developing countries to development and at the same time solving those challenges being faced by such developing countries. 

There has been a huge global movement toward impact investing which is giving rise to social enterprises aimed at solving the challenges that will have been resolved by government on market-based approach. Impact investing in Africa remains nascent and has the potential to resolve the African challenges especially in health, education, social services, provision of energy etc. and at the same time contribute to the continent’s economic growth and development objectives. This will be going a long way in replacing official development assistance (ODA) which has predominately been the source of development finance in the continent.

In the past the continent was focused on official development assistance (ODA) from developed and other emerging markets, to meet the basic service needs of their populations. Due to the uncertainty faced by the global economies, it is expected that ODA will no longer be the major source of development financing in developing countries. 

Private sources of capital will play a larger role where it will be used to improve access to social services in Africa. In other ways as noted above, ODA will be more innovative and will be based on market based approach which will be more efficient and effective. 

In the last decade, there has been a significant increase in the private financial flows to Africa as the traditional ODA declines. This will mean that there is need for the African Governments to provide the relevant space to attract even more private funding and especially where those funds will be able to provide for the public goods in a market-based approach. 

This will, in turn, be of help in addressing the socio-economic challenges by providing market-based solutions that address the priority areas such as health, education, water and energy supplies among others. 

Impact investment has the potential to fill in the above space and to complement public spending and ODA. This will be achieved by bringing in private sector capital and skills to reduce African economies’ vulnerability to external shocks, providing a market-based solution to address socio-economic needs. 

In some instances, there will be need for allowing ODA and other public funds flows to focus on addressing social needs for which there is no viable market-based solution.

In other words, the room for ODA is not completed vanished only that it will become more innovative and in fewer and fewer cases it will be done on a non-market basis.

Now and in the future Africa, long dependent on aid, will instead rely on investment to fuel its growth. Rapid growth is expected, because of the rise of the middle class, stable governments, urbanization, and improved infrastructure. Both large-scale institutional opportunities and smaller-scale opportunities for direct investment will be prevalent in the future. 2019 will present a good year for the continent to encourage more social enterprises and mission driven investment with the aim of resolving some of the challenges that the continent is faced with in a more market-based way. This call for innovative financing, innovative business models and innovative technologies.

 

Re-Thinking Our Economy: Leaning on a Circular Economy Model

By the year 2050, world population is expected to reach almost 10 billion people according to research by the United Nations. In addition, it is projected that more people will join the middle class resulting in enhanced human well being globally. Despite these improvements in socioeconomic and demographic developments and their associated benefits to individual prosperity, humans will have to exert further pressure on the limited and already depleting natural resources to keep the status quo.

Additionally, calculations reveal that with the current way of global production and consumption patterns we already need 1.7 planet Earths and humans’ ecological footprint is only projected to increase. From these numbers,it becomes evident that society needs to find responsible and sustainable ways to meet individual needs, establish economic growth and secure the demands of future generations, all within the ecological boundaries of the planet. Thus, this requires us to rethink our current economic models.

Sustainable Development Goal 12 for Responsible Consumption and Production

The urgency to reduce our ecological footprint through changing current production and consumption patterns is formulated in Sustainable Development Goal 12: Ensure Responsible Consumption and Production. SDG 12 is one of the 17 Sustainable Development Goals, which is a framework that can be considered as the world’s strategy to address the global economic, social and environmental challenges our planet is currently facing.

With the forecasts of a rising world population, an acceleration of global development and the related rising demand and usage of resources, SDG 12 underlines that business, as usual, is not an option for a sustainable future. More and more businesses have become aware of these sustainability issues and along with increased societal pressure, corporations have started to explore alternative ways of doing business.

The pursuit of businesses towards more sustainable business practices and processes has led to the emergence of new and innovative sustainable business practices and models, including the circular economy business model.

Moving from a linear to a circular economy

The circular economy framework is an alternative to the common, traditional linear economy, and requires a shift from a ‘take, make and dispose’ economy, to a ‘reuse, redesign and regenerate’ production model. In this latter model, waste streams are considered as input for new products and processes.

The circular economy model follows the following three principles:

  1. Design out of waste and pollution
  2. Keep products and materials in use
  3. Regenerate natural systems

Moreover, this economic model is a response to the worldwide growing waste streams and the increasing pressure on natural resources. By circulating resources again and again through closed loops, the maximum value of resources is extracted.

Upcoming circular business models are turning trash into treasure

The circular economy model has been researched and praised already by many organisations in developing countries, especially within Europe. Nextto that, it has become part of various corporate strategies and has been adopted in numerous business models.

Global sportswear company PUMA is one of the companies that has been experiencing with circular product lines a few years ago. They launched a certified Cradle-to-Cradle product line, which included a shoe, shirts, a jacket and a backpack. The shoe, for example, is entirely made from organic cotton, linen and bio plastic, which PUMA promises to shred and compost it when customers recycle the shoe.

In contrast, this new economic model just started to gain attention in Africa with the launch of the African Circular Economy Alliance at the end of 2017, initiated by Rwanda, Nigeria and South Africa in cooperation with World Economic Forum and Global Environment Facility. This alliance was started to fast-track the adoption of the circular economy model here in Africa. There is a lot of potential in Africa to adopt a circular business model, as waste management in many countries is still an issue, making it a perfect chance to deal with this challenge.