Ursula von der Leyen's Speech to Davos 2022 In Full

This article is part of the World Economic Forum Annual Meeting

European Commission President Ursula von der Leyen addressed Davos 2022 today.

She called for unity and interational cooperation in the face of Russia's invasion of Ukraine and the shocks to energy and food security its caused.

[caption id="attachment_22107" align="aligncenter" width="900"] Ursula von der Leyen at Davos 2022.[/caption]

Ladies and Gentlemen, it is difficult to believe that in Davos today we talk of war. The Davos spirit is the antithesis of war. It is about forging ties and together finding solutions for the big challenges we face.

In recent years, we have looked for smart and sustainable ways to fight climate change. And how to shape globalization so that all can benefit. How to make digitalization a force for good, and mitigate its risks for democracies.

Davos is all about crafting a better future together. That is what we should be talking about here today.

Instead, we must address the costs and consequences of Putin’s war of choice.

The playbook of Russia’s aggression against Ukraine comes straight out of another century. Treating millions of people not as human beings, but as faceless populations to be moved or controlled or set as a buffer between military forces. Trying to trample the aspirations of an entire nation with tanks.

This is not just a matter of Ukraine’s survival. It is not only an issue of European security. This is putting our whole international order into question.

And that’s why countering Russia’s aggression is a task for the entire global community.

Ukraine must win this war. And Putin’s aggression must be a strategic failure. We will do everything we can to help Ukrainians prevail and retake the future into their hands.

For the first time in our history, the European Union is providing military aid to a country under attack. We are mobilizing our full economic power.

Our sanctions and the self-sanctioning by companies themselves are draining Russia’s economy and thus draining the Kremlin’s war machine. Our member states are caring for 6 million Ukrainian refugees and there are 8 million internally displaced people in Ukraine itself.

And in parallel, Ukraine needs direct budget support now to keep the economy running. It's about pensions, it's about salaries, it's about basic services that have to be provided ….

We have proposed over 10 billion euros in macro-financial assistance – the largest package of macro-financial assistance ever conceived by the European Union for a third country.

Other countries, starting with our friends in the United States, are doing their utmost too. It is an economic relief operation with no precedent in recent history.

That is the short term. But much more needs to be done.

With the same resolve, we will – hand in hand – help Ukraine rise from the ashes. That’s the idea behind the reconstruction platform, that I have proposed to President Zelensky.

Yesterday in his speech here in Davos, he recognized the unprecedented unity of the democratic world. The understanding that freedom must be fought for.

The rebuilding of Ukraine also calls for our unprecedented unity. As President Zelensky said: the work that has to be done is colossal. But together we can and we will master the challenge. That is why we have proposed a reconstruction platform, to be led by Ukraine and the European Commission because we will combine reform with investment.

The platform invites global contributions from any country that cares about the future of Ukraine. From international financial institutions and from the private sector. We need everyone on board

And I was glad to hear about the conference in Lugano. Borge Brende called it a Marshall plan for Ukraine.

And, we should leave no stone unturned, including, if possible, Russian assets. But this is not only about un-doing the damage of Putin’s destructive fury. It is also about building the future that Ukrainians chose for themselves.

For years now, the people of Ukraine have worked for change.That is why they elected Volodymyr Zelensky in the first place.

The reconstruction of the country should combine massive investment with ambitious reforms.

- To modernize Ukraine’s administration.

- To firmly establish the rule of law and the independence of the judiciary.

- To fight corruption.

- To build a fair, sustainable and strong, competitive economy.

And thus to firmly support Ukraine in pursuing its European path. Ukraine belongs in our European family. Ukrainians have stood tall in the face of brutal violence. They have stood for their own freedom and for humanity.

We stand with them and I think this is a defining moment for the democracies of the world.

Ladies and Gentlemen, this conflict is also sending shockwaves throughout the world, further disrupting supply chains already stretched by the pandemic. It is putting new burdens on businesses and households, and it has created a thick fog of uncertainty for investors across the globe. And more and more countries and companies, already battered by two years of COVID-19, and all the resulting supply-chain issues must now cope with rising prices for energy as a direct result of Putin's unpardonable war.

And, Russia has tried to put pressure on us by for example cutting-off Poland, Bulgaria and Finland from gas deliveries. But this war, and this behaviour, have only strengthened Europe’s resolve to get rid of Russian fossil fuels rapidly.

The climate crisis cannot wait. But now the geopolitical reasons are evident, too. We have to diversify away from fossil fuels. We have already set our course towards climate neutrality. Now, we must accelerate our clean energy transition.

Fortunately, we already have in place the means to do so. The European Green Deal is already ambitious. But now we are taking our ambition to yet another level.

Last week the European Commission presented RePowerEU, it is a 300 billion euro plan to phase out Russian fossil fuels and fast forward the green transition.

Today, almost a quarter of the energy we consume in Europe stems from renewable sources. Through RePowerEU, we will practically double this share to 45% in 2030.

This is only possible by also bringing cross-border cooperation to a new level. Take for example what’s happening in the North Sea.

Last week, 4 European member states joined forces to harness the energy of off-shore wind. They decided to quadruple their off-shore wind capacity by 2030.

That will mean wind farms in the North Sea will cover the annual energy consumption of more than 50 million homes - this is roughly one-quarter of all European households!

This is the right way to go. Renewable energy is our springboard towards net-zero CO2 emissions. It is good for the climate. And it is good for our independence and security of energy supply.

The same is true for the diversification of our gas supply, another pillar of RePowerEU. As we speak, Europe is concluding new agreements with reliable, trustworthy suppliers all over the world.

In March, I agreed with President Biden to significantly step up LNG deliveries from the US to Europe. More LNG and pipeline gas will also come from the Middle East and North Africa. New LNG terminals in Greece, Cyprus and Poland will soon become operational, as will new interconnectors. And the connecting pipeline infrastructure will form the core of our future hydrogen corridors – hydrogen is the new frontier of Europe’s energy network.

But we must also think further ahead. The economies of the future will no longer rely on coal and oil:

- But on lithium for batteries.

- On silicon metal for chips.

- On rare earth permanent magnets, for electric vehicles and wind turbines

And it’s for sure - the green and digital transitions will massively increase our need for these materials. However, access to these materials is not a given.

For many of them, we rely on a handful of producers in the world. So, we must avoid falling into the same trap as with oil and gas. We should not replace old dependencies with new ones. We are therefore working to ensure the resilience of our supply chains. And again, strong international partnerships are at the heart of the solution.

The Commission has already secured strategic raw materials partnerships with countries like Canada. And additional reliable partnerships will follow. Together we can create more balanced interdependencies,and build supply chains that we can truly trust.

Ladies and Gentlemen, we are witnessing how Russia is weaponizing its energy supplies. And this is having global repercussions. Unfortunately, we are seeing the same pattern emerging in food security.

Ukraine is one of the world’s most fertile countries. Even its flag symbolises the most common Ukrainian landscape: a yellow field of grain, under a blue sky. Now, those fields of grain have been scorched.

In Russian-occupied Ukraine, the Kremlin’s army is confiscating grain stocks and machinery. For some, this has brought back memories from a dark past – the times of the Soviet crop seizures and the devastating famine of the 1930s.

Today, Russian artillery is bombarding grain warehouses across Ukraine. Deliberately. And Russian warships in the Black Sea are blockading Ukrainian ships full of wheat and sunflower seeds.

The consequences of these shameful acts are there for everyone to see. Global wheat prices are sky-rocketing. And it is fragile countries and vulnerable populations that suffer most. Bread prices in Lebanon have increased by 70%, and food shipments from Odessa could not reach Somalia.

And on top of this, Russia is now hoarding its own food exports as a form of blackmail - holding back supplies to increase global prices, or trading wheat in exchange for political support.

This is using hunger and grain to wield power. Once again, our answer is and must be to mobilise greater collaboration and support at the European and global level.

First, Europe is working hard to get grain to global markets. There are currently 20 million tons of wheat stuck in Ukraine. The usual export was 5 million tons of wheat per month.

This is now down to 200,000 to 1 million tons. By getting it out, we can provide Ukrainians with much-needed revenues, and the World Food Programme with supplies it badly needs.

To do this, we are opening solidarity lanes, linking Ukraine´s borders to our ports. We are financing different modes of transportation. So that Ukraine´s grain can reach the most vulnerable countries in the world.

Second, we are stepping up our own production to ease pressure on global food markets. And we are working with the World Food Programme, so that available stocks and additional products can reach vulnerable countries at affordable prices.

Global cooperation is the antidote to Russia’s blackmail.

Third, we are supporting Africa in becoming less dependent on food imports. Only 50 years ago, Africa produced all the food it needed. For centuries, countries like Egypt were the granaries of the world. Then climate change made water scarce, and the desert swallowed hundreds of kilometers of fertile land, year after year.

Africa is now heavily dependent on food imports and this makes it vulnerable.

Therefore, an initiative to boost Africa’s own production capacity will be critical to strengthen the continent’s resilience. The challenge is to adapt farming to a warmer and drier age. Innovative technologies can help us leap-frog. Companies around the world are already testing high-tech solutions for climate-smart agriculture.

Precision irrigation operating on power from renewable, for example. Or vertical farming. Or nanotechnology, which can cut the use of fossil fuels when producing fertilizers.

Ladies and Gentlemen

The signs of a growing food crisis are obvious. We have to act urgently. But there are also solutions, today and on the horizon. This is why I am working with President el-Sisi to address the repercussions of the war with an event on food security and solutions in Europe and in the region.

It is time to end unhealthy dependencies.

It is time to create new connections.

It is time to replace old chains with new bonds.

Let’s overcome this huge challenge in cooperation. In the Davos spirit.

Source


Paolo Sironi, IBM: 2022 Global Outlook for Banking and Financial Markets

In the third year of a global pandemic, the financial services industry appears to be acclimating to a new reality. Many temporary measures put in place are now poised to become permanent, and a new industry structure is emerging. While the industry may have averted a major crisis, it is still underperforming its pre-financial crisis levels. It has lagged many other industries — and a host of new competitors — in several dimensions, including financial performance, customer experience, and embracing new business, operating, and collaboration models. Banks are facing three key transformation needs. First, they must address the end-to-end digitisation of enterprise-wide operations to enable new customer-centric business models, new products and services, new ways of working, and an ecosystem of partners. Digitisation is critical to meeting customer expectations and powering financial performance across revenue, costs, and capital. Second, they must transform the core data environment to drive efficiency and flexibility. They must leverage the collaborative use of deep analytics and AI at scale. This includes building an ethical framework around how data is captured, stored, and used. Third, they must enable a modern and flexible technology architecture to deliver optimal interoperability and portability to support the deployment and management of workloads across multiple compute environments, while helping financial services organisations meet security and compliance requirements.

In this year’s Global Outlook for Banking and Financial Markets, the IBM Institute for Business Value invited the global IBM industry experts to discuss these transformation needs, reflecting on their experience with clients over the last 12 months and their expectations for the coming year. Their collective point-of-view highlights ten top industry imperatives:

– Real industry reinvention. Begin real reinvention — now—to solve the structural weaknesses that constrain financial performance. Financial institutions must seek out new business models to drive incremental revenue gains, new operating models and compute environments that structurally reduce operating costs, and new approaches to improve the efficiency of capital.

– Customer-centric business models. Build new customer-centric platform business models to orchestrate and integrate the many needs of ecosystem participants in a more frictionless environment. Leading financial institutions are creating their own bank-led ecosystem business models to serve attractive market segments, while deeply integrating their products and services with other companies’ well-established platforms.

– End-to-end digitisation. Embrace end-to-end extreme digitisation to reshape operations and drive innovation. To win the race to all things digital, financial institutions are adopting new ways of exploiting exponential technologies such as automation, hybrid cloud, and AI. They drive digitisation across internal business units and their ecosystem of external partners while helping ensure security and compliance.

– Operational resilience. Act with urgency to increase resiliency for better risk management and to address regulatory concerns. As financial institutions pivot workloads and volumes to new channels, operations, and partners in response to the pandemic, resiliency has leapt to the forefront of industry priorities. Further resiliency improvements are required to support new business and operating models now being embraced by the industry.

– Viable sustainability. Find viable sustainability models so financial institutions can launch initiatives to meet market expectations, regulatory requirements, and corporate ethical objectives — all with an acceptable cost-benefit case.

– Transformed use of data and AI. Deploy AI factories and transformed data environments that put data in action to accelerate transformation. By ethically adopting new deep analytics and AI tools, financial institutions can enhance operations and customer experiences, and better meet regulatory obligations.

– New workforce and new workplaces. Embrace the reality of a new workforce in new workplaces that redefine how, where, and when work is performed. The financial institution’s workforce now incorporates employees, subcontractors, vendors, and partner employees. New models can enable effective collaboration across this expanded workforce in changing physical and digital work environments.

– New ecosystem architectures. Engage an ecosystem of partners to fuel faster innovation and efficiency. As financial institutions accelerate their transformation, they increasingly partner externally to deliver better functionality at a structurally lower cost across their operating model.

– Emerging digital assets. Tap into the growing momentum for digital assets by working to create new customer and partner ecosystems, new products and services, and new use cases. Financial institutions can be enablers and product providers in the fast-growing digital asset marketplace.

– Security and fraud. Stay one step ahead in the new frontiers of cybersecurity as bad actors become increasingly sophisticated. While new business and operating models are providing innovative ways to serve customers anywhere and anytime, they also create opportunities for security breaches. Financial institutions are revisiting their enterprise risk profile and deploying enhanced security capabilities within their walls and across their ecosystems.

Many organisations have already started addressing some or most of these compelling needs. Others are not keeping pace. A new model for consuming financial services and accelerated digitisation across the industry demands that institutions adjust course and begin real transformation today.

The 2022 Global Outlook for Banking and Financial Markets can be downloaded in full found on IBM, the Institute for Business Value pages: ibm.co/2022-banking-financial-markets-outlook

About the Author

[caption id="attachment_20860" align="aligncenter" width="300"] Author: Paolo Sironi[/caption]

Paolo Sironi is the global research leader in banking and financial markets at IBM Consulting, the Institute for Business Value. He is one of the most respected fintech voices worldwide, providing business expertise and strategic thinking to a network of executives among financial institutions, start-ups, and regulators. He is a former quantitative risk manager and start-up entrepreneur. Paolo’s literature explores the biological underpinnings of financial markets, and how technology and business innovation can bolster the global economy’s immune system in today’s volatile times. Visit Paolo's website thePSironi.com for more information.


WEF 2022: The World Is No Longer Flat

This week, a colourful cabal of cognoscenti gathered in Davos to offer diverse takes on the world’s most pressing issues. With climate change, war, pestilence, and a host of lesser plagues assailing the global village, there is not a dearth of troubles nor a shortage of talking heads proposing solutions.

During a luncheon of the World Economic forum’s International Business Council on Wednesday, Citigroup CEO Jane Fraser helpfully quipped that we all need to be mindful of the three Rs: Russia, Recession, and Rates. Meanwhile, billionaire investor and philanthropist George Soros fears a global depression sparked by economic mismanagement in China, disrupted supply chains, and inflation. Mr Soros also said that the opening salvos of World War 3 have probably already been fired and that civilisation may not survive it.

Never a particularly cheerful event, this week’s gathering of the World Economic Forum displays even more gloom and doom than usual. Listening in, it would seem the world always teeters on the brink of some potential extinction event, be that climate change, war, or disease. If not, it’s the Fourth Industrial Revolution – the pet project/vision of WEF Founding Father Klaus Schwab – which will sweep all before it and usher in an era of robotics, artificial intelligence, and machine learning – one in which the human dimension becomes optional.

Walls Going Up

At the flagship event of globalisation, sometimes described as a jamboree for billionaires and their groupies, the Davos crowd is clearly worried that walls are being erected around geopolitical power blocs in a re-enactment of the Cold War. Populist nationalism, a force long suppressed, is also rearing its (ugly) head and undermining, from within, the liberal post-war world order.

If the latest WEF get-together shows anything, it must be that Davos and its pseudo-woke agenda are quickly becoming irrelevant. The forum, of course, always had trouble squaring its message to its messengers: virtue-signalling billionaires and grossly overpaid executives showering the hoi polloi with nuggets of their timeless wisdom sometimes lack a measure of credibility. Corporates promising to loosen their fiduciary duty to please environmentalists and embrace newfound social responsibilities have of late suffered a backlash from investors and fund managers questioning the actual depth and breadth – and seriousness – of their much-touted ESG initiatives.

A-listers were conspicuously absent at this year’s WEF event. Even Greta gave the gathering a pass and the Chinese remained at home – in lockdown. Of course, Vladimir Putin, a keynote speaker at last year’s virtual meeting, stayed at home and mum. His nemesis President Volodymyr Zelensky of Ukraine received a standing ovation for a rousing speech delivered by video link in which he asked corporates to severe all links to Russia.

WEF Executive Chairman Klaus Schwab put on a brave face and celebrated the nearly 2,500 people who did show up, proof, he said, of the need for a “trusted, informal, and action-oriented global platform.” However, as a forum celebrating globalisation, the WEF risks losing relevance in an era of fragmentation. Also, the war in Ukraine and its economic fallout has bumped climate change off the top spot on the list of global concerns. The challenge of shaping a green future whilst meeting the COP26 (Glasgow) commitments was largely left unaddressed.

Patriotic Millionaires

A welcome distraction was supplied by a protest of the ‘Patriotic Millionaires’ who demand governments start taxing them to counter rising inequality. The millionaires staged a sit-in demanding that political leaders stop listening to ‘those who have the most yet know the least about the cost-of-living crisis.’

Former business consultant and financial adviser Phil White of Patriotic Millionaire UK said the “only credible outcome” of the WEF event would be a strong resolve to tax the rich. The movement sent an open letter to all WEF participants calling for the introduction of wealth levies. Worldwide, about 150 millionaires and billionaires signed the letter.

In its annual report on inequality, UK charity Oxfam claimed that since early 2020 a new billionaire has been created every 30 hours, about the same time (33 hours) it takes to push a million people into poverty.

IMF Managing Director Kristalina Georgieva spoke of a “confluence of calamities” facing the global economy: “We are concerned that the world is heading towards more fragmentation with trade and currency blocs splitting the integrated global economy.”

IMF Chief Economist Gita Gopinath noted that things are likely to get worse before they get better and said that a recovery may be lopsided and favour advanced economies. Ms Gopinath departed from convention by dismissing fears of a wage-price spiral fuelling inflation: “Wages do not have to be suppressed. A situation may arise in which wages rise but prices do not. Profit margins could be squeezed instead.”

Rebuke

Governor Andrew Bailey of the Bank of England took a more orthodox view and asked workers to “think and reflect” before asking their employers for pay rises. Mr Bailey, who earns £575,000 a year, disclosed that he had refused a pay rise. His remark drew a prompt rebuke from Prime Minister Boris Johnson and the ire of Unite union leader Sharon Graham who wondered why in every crisis “rich men ask ordinary people to pay for it.”

Expecting to realise $250bn in oil revenues this year, the cash-flush delegation of Saudi Arabia offered a bright spot in Davos with representatives of less fortunate states queueing up to ask for a slice of the kingdom’s sovereign wealth fund investments. Aramco CEO Amin Nasser warned the world is failing to take the issue of energy security, availability, and affordability seriously. Mr Nasser said that the West’s “overzealous embrace” of the green transition had led to years of under-investment and high oil prices. Earlier this month, Aramco overtook Apple as the world’s most valuable company.

Charles Kaye, CEO of Warburg Pincus – one of the world’s largest private equity funds, summed up the sombre mood in Davos by noting that “pretty much no one has seen conditions like the present during the arc of their investing career.” Mr Kaye also commented that until recently, the absence of geopolitical considerations had “provided oxygen to global growth.”  However, he said that now geopolitics are “front and centre” of investment decisions as are the novel concepts of reshoring, nearshoring, and onshoring. The world, it would seem, is no longer flat.


Tamsin Lejeune: Saving the World in Style

[caption id="attachment_22157" align="alignright" width="300"] Founder & CEO of Ethical Fashion Forum and Common Objective: Tamsin Lejeune. Source: Drapers[/caption]

Tamsin Lejeune, founder and CEO of the Ethical Fashion Forum and Common Objective, is uniting a global community behind a mission to make fashion more sustainable.

Lejeune worked as an architect before striking out in the fashion industry. She grew up in Africa, has worked in shanty towns in Cambodia, and launched a fair-trade clothing label in Bangladesh.

“I am passionate about the potential for business to transform livelihoods and break the poverty cycle in communities all over the world,” she wrote on LinkedIn. “Entrepreneurs (and intrapreneurs) with ideas, creativity and drive are a powerful force for global change.”

The ultimate goal is to make it easier for global industries to generate value in three dimensions: the “triple bottom line” of people, planet and profits. Lejeune opted to start with the fashion industry in part for its outsized role in global pollution and labour violations, but also for the variety of industries that it encompasses: agriculture, textiles, manufacturing, logistics, design and more.

“As the devastating impact of the fashion industry on the environment gathers pace, I (and thousands of others) have gained a sense of urgency,” she writes. “We all share a common objective — that of building smarter businesses, that safeguard our global environment.”

Lejeune set up the Ethical Fashion Forum (EFF) in 2006, citing the need and demand for an industry body dedicated to promoting environmentally and socially responsible practices.

“Our mission has always been to create a platform through which great business is done — business that maximises benefits to people and minimises impact on the environment, from one end of the supply chain to the other,” Lejeune told fashion magazine Drapers. “Fashion business, done well, is transformative, creating inspiring products and sustainable, fulfilling jobs, grounded in fair practices between buyers and suppliers.”

Lejeune is intent on taking sustainable fashion “from niche to norm”. In 2011, the EFF introduced an online platform to facilitate sustainable sourcing across the fashion industry. Lejeune spearheaded efforts to secure funding to scale the tech-powered network.

The Ethical Fashion Group (EFG) was founded in 2015 as a limited-share company with the capacity to raise equity investment. It built on the forum’s legacy to develop a rebranded sourcing platform, Common Objective (CO), which has become a recognised trading name for EFG.

CO closed its latest funding round in May 2020, raising £350,000 through the crowdfunding platform Crowdcube. Funding to date totals £1.1m and includes seed capital support from French designer Roland Mouret and industry veteran Harold Tillman, a founding investor who serves as chair emeritus.

Tillman, former chairman of the British Fashion Council, says the tech platform is a gamechanger that will meet “the growing customer demand to know where and how their garments and accessories are made”.

CO aims to disrupt the $2tn fashion industry with a global B2B sourcing and information platform that rewards sustainable businesses with higher search rankings. CO membership is free for individuals and businesses, but PRO plans come with unlimited connections and privileged access to content, events and courses. The platform is used by more than 30,000 fashion professionals in 150 countries.

The group launched a fashion consultancy practice in late 2019, CO Consults, bringing together experts from fashion subsectors to put sustainability front and centre.

Lejeune was recently announced by LinkedIn as the UK's best-connected woman in fashion and textiles. She believes this points to growing consensus about the importance of ethical and sustainable business in the industry, which accounts for an estimated 300 million workers across related sectors. “If we can build collaboration between those professionals who want to see change — we can move mountains.”

However, the pandemic has threatened the momentum, particularly on the social front. “There are millions of people being laid off in fashion, both in the consumer-facing side and in supply chains,” Lejeune warns. “In recent years, the focus on sustainability has ramped up, but the discussion has mainly been around the environment. The social issues have been less relevant. The two are entwined but we’ve overlooked the human side. We can’t do that now.

“Our fashion system has supported millions of people, and the two sides of the coin need to be looked at. We need to look at the environmental impact and how the industry is structured — how you build a business model that protects everyone involved.”


Biggest Commodity Price Shock in 50 Years is Here

In addition to death and destruction in Ukraine, the Russian invasion brought several significant shocks to the global economy.

The geopolitical consequences of the war reinforce the downward trend in trade globalisation and financial integration, with fresh rounds of disruption in supply chains and economic growth projections.

Commodity prices stabilised in April, but intensifying trends that have been present since mid-2020 have led to significantly higher prices in 2022. They will remain there in the medium term, according to the World Bank’s Commodity Markets Outlook report.

[caption id="attachment_22167" align="aligncenter" width="808"] Figure 1: Commodity Prices. Source: World Bank (2022). Commodity Markets Outlook, April.[/caption]

The outlook for commodity markets will depend on the duration of the war in Ukraine, sanctions on Russia, and disruptions to commodity flows. The two countries are important suppliers of energy, fertilizers, some types of grains and metals. Russia is the world's biggest exporter of natural gas, nickel, and wheat, while Ukraine is the biggest exporter of sunflower oil. These commodities experienced sharp price increases after the start of the war.

Several countries — the US, Canada, and the UK —have announced bans or the phasing-out Russian oil imports. Private buyers have also pledged to cut purchases. What about supply alternatives? One problem — observed in a study by the Federal Reserve of Dallas — notes that production capacity restrictions in OPEC+ member countries are preventing them from even fulfilling quotas.

The recent IMF World Economic Outlook report suggests that the anticipation of falling demand for fossil fuels has reduced global investment in oil and gas by about 20 percent in recent months. After spiking during the “shale revolution”, global upstream oil and gas investment peaked at 0.9 percent of global GDP in 2014, falling to less than 0.5 percent of global GDP in 2019, and further during the pandemic (Figure 2).

[caption id="attachment_22166" align="aligncenter" width="721"] Figure 2: Oil and Gas Investment as Share of World GDP (%, US$ a barrel).[/caption]

The price of Brent crude reached an average of $116 a barrel in March, something not seen since 2013. The World Bank forecasts oil prices to average $100 a barrel this year, before declining to $92 a barrel next year.

European natural gas prices have risen to almost seven times the level of one year before. Coal prices have tripled because of expected disruptions to Russian natural gas and coal exports. The new jumps made the increase in energy prices over the past two years the biggest since the oil shock in 1973 (Figure 3).

[caption id="attachment_22165" align="aligncenter" width="754"] Figure 3: Energy Price Growth. Source: World Bank (2022). Commodity Markets Outlook, April.[/caption]

The higher price levels will ensure, reinforced by two factors. As price hikes hit all fuels, there is not much scope to replace the most affected energy commodities with alternative fuels.

Secondly, energy commodities have a strong influence on other prices. Natural gas prices have pushed up fertilizer prices, putting pressure on agriculture.

In the case of food, trade disruptions and high input costs have had a significant impact. The UN food price index placed them at the highest level since the beginning of its tracking 60 years ago. It's not just wheat prices because of the war. Frustration with wheat and soybean crops in South America has negatively affected their global availability.

Higher prices and risks of fertilizer shortages are a source of concern for the next year. Food security and possible social upheavals have become central issues in the poorest food-importing countries in Africa, the Middle East, and Asia.

Some metals reached unprecedented price levels in March due to supply disruption, with inventories at historically low levels. Ukraine and Russia are sources of palladium and platinum, both of which are used in the manufacture of catalytic converters for the automobile industry. Platinum, copper, and nickel are critical for EV batteries. Ukraine is also the source of 50 percent of the world's neon gas, used for lasers in the manufacture of semiconductor chips.

The Ukraine war has been the main driver of aluminium and nickel price movements, while high energy prices have affected zinc. These metals are vital to renewable power technologies such as solar panels and wind turbines. More price increases or interruptions in the supply of these metals could make the energy transition more expensive.

In the short term, the macro-economic impacts of the commodity price shock will differ among emerging economies, depending on whether they are exporters or importers. In Latin America there is a new inflationary spike; exporters, GDPs, trade balances and public sector accounts stand to benefit. Brazil had its growth projection slightly increased by the IMF to 0.8 percent and 1.3 percent, respectively for 2022 and 2023.

The war in Ukraine and the shock of energy commodity prices have not been favourable to the energy transition. The pandemic is not yet over, with looming global consequences of the China lockdowns.

For the recent combination of pandemic, war, and death not to assume apocalyptical proportions, we must prevent further delays in the energy transition.

By Otaviano Canuto


What You Need to Know About Stockholm+50

On 2 and 3 June 2022, world leaders and representatives from government, business, international organizations, civil society and youth will gather in Sweden for Stockholm+50 – an international meeting to drive action towards a healthy planet for the prosperity of all.

The event comes at a crucial time as the Earth is in emergency mode, and urgent action is needed to address the triple planetary crisis of climate change, nature and biodiversity loss, and pollution and waste.

So what exactly is Stockholm+50, and why is it important?

What is Stockholm+50?

Co-hosted by Sweden and Kenya, Stockholm+50 will take place under the theme “a healthy planet for the prosperity of all – our responsibility, our opportunity.”

The two-day meeting will commemorate the 50th anniversary of the United Nations Conference on the Human Environment in Stockholm - which marked a new era of global cooperation.

At the 1972 conference, 113 countries adopted the Stockholm Declaration and Action Plan for the Human Environment , placing environmental issues at the forefront of international concerns. The conference also led to the creation of the UN Environment Programme (UNEP) and began an important dialogue between industrialized and developing countries on the links between the environment, economic growth and human well-being.

Stockholm+50 marks a milestone in our collective journey toward a healthy planet. It offers the opportunity to reflect on, celebrate and build upon 50 years of environmental action.

The meeting will be organized around plenary segments , three leadership dialogues and side events that will focus on the importance of multilateralism in tackling the triple planetary crisis.

It will also reinforce the outcomes of the fifth UN Environment Assembly , which took place earlier this year in Nairobi, Kenya.

Mrs. Indira Gandhi, former Prime Minister of India, addresses the 1972 Stockholm Conference. Photo: UN Photo/Yutaka Nagata

What is the triple planetary crisis?

The triple planetary crisis consists of three interlinked issues threatening human and environmental health: climate change, nature and biodiversity loss, and pollution and waste.

The climate crisis is causing more frequent extreme weather events such as storms and droughts, which worsen food and water scarcity. Research shows that to stave off a climate catastrophe , the world must halve annual greenhouse gas emissions by 2030 to reach net-zero by 2050.

Human activities have modified 77 per cent of land (excluding Antarctica) and 87 per cent of the ocean . More than 2 billion hectares of land is degraded due to overuse or mismanagement. and one million species face extinction.

Air pollution, the greatest environmental threat to public health globally, accounts for an estimated 7 million premature deaths every year . 11 million metric tons of plastic waste enter our ocean every year. At the same time, we produce 50 million tons of e-waste.

How will Stockholm+50 address the planetary emergency?

Stockholm+50 will help accelerate the implementation of the 2030 Agenda and the Sustainable Development Goals to achieve a healthy planet – which is essential for social and economic progress, well-being, and resilience.

By gathering a broad set of stakeholders from all around the world, the meeting will emphasize the importance of a multi-actor, multi-sector approach to addressing environmental issues and embody the importance of collaborative action. Stockholm+50 also highlights our intergenerational responsibility to protect the Earth and ensure that life support systems are available to all.

For 50 years, the world has come together to confront the planet’s biggest environmental challenges , from eradicating the production of leaded fuel to protecting more than 38,000 species and mending the hole in the ozone layer. This global cooperation has restricted the international trade in mercury, banned hazardous chemicals and reduced renewable energy prices.

But 50 years on, the need to accelerate action for the environment, poverty alleviation and human rights is more urgent than ever.

Stockholm+50 provides a unique opportunity to be another turning point and steer humanity back on the path to a healthy planet and the prosperity of all.

Follow the Stockholm+50 feed for updates.

This story was originally published on 25 May 2022 on the UNEP site: https://www.unep.org/news-and-stories/story/what-you-need-know-about-stockholm50


Martin Höfeler: Fashions Come and Go, but Style — and Environment — are Forever

[caption id="attachment_22203" align="alignright" width="300"] Armedangels CEO: Martin Höfeler[/caption]

It’s all about sustainability in 2022, and there’s likely to be no lessening of focus in coming decades.

Sustainability matters, in a way that other modern notions and buzzwords don’t. People matter; the planet matters. In the fashion industry, brands — and, perhaps more importantly, consumers — are carrying our collective environmental conscience, and shouting their call for unity from the rooftops.

Enter Martin Höfeler, CEO of German fashion firm Armedangels, who sees no dichotomy here. There’s no issue, he has always believed, that makes attractive fashion and environmentally friendly fashion incompatible.

Höfeler’s aim from the word go has been to combine sustainability and design. And the “word go” was uttered some time ago — before such attention was paid to the planet, its resources, or its people. “Ten years ago,” he told New Zealand’s the-spin-off.com back in 2016, “we only existed as an idea on white paper. Five years (earlier), we were known as an online shop for sustainable T-shirts and prints. Today, we belong to the best-known fair fashion labels in Germany — in wholesale, and with our own online shop.”

Five years may be a long time in fashion, but a decade — especially one prior to 2016; the company was founded in 2007 — would take us back to the dark ages in terms of awareness of global issues. Martin Höfeler was one of the pioneers, an early adopter who has benefitted from astute choices made at the right time.

“Fair fashion” is his continued focus, and — as you may have guessed — in 2022, he is eyeing-up the next 10 years to follow through on his ideas and ideals. His values haven’t changed one jot.

Of course, it’s one thing to run a business in a sustainable way, to do everything “right” in all the important ways. It’s another to fulfil a fashionista’s role: to give people what they want — before they know they want it. Höfeler has not been fazed.

As far as Höfeler is concerned; his mission is ongoing, and his creative output has not faltered. “We want to convince people to rethink their buying behaviour,” he famously said.

So much for the continued sustainability focus, all-important to his personal and professional quest. Höfeler has juggled those human and environmental values with the maintenance and expansion of an constantly evolving fashion brand. “Nobody wants to wear an ugly T-Shirt, no matter how sustainable it is in production,” he was once quoted as saying.

Climate change is one of the most prominent threats facing the modern world, and it’s a doozy. Solutions, in terms of resetting the clock, are — for the moment, at least — out of reach. And the fashion industry is part of the problem. It’s rated as one of the dirtiest industries — and in a world of nukes, fossil fuels and microplastics, that’s saying a lot.

Armedangels was founded, Höfeler told FashionUnited, not “to make fashion, but to make change for planet and people". Colours nailed to the mast, right there.

While the first years may have been slow, as Höfeler and his team overcame general ignorance and apathy, but 2021 came with its own special challenges.

Special challenges, however, are bread and butter to the German fashionista. One of the company's visions “is to change things beyond its own product by supporting NGOs (and) activists on the frontline”.

In March last year, his Solidarity Series was introduced. The spotlight was, thanks to events in the US, on black and indigenous voices. A T-shirt edition was created in collaboration with US activist Tamika D Mallory, featuring her Speech of a Generation, delivered after the death of George Floyd.

During the 2021 federal election, Armedangels — in co-operation with the GermanZero organisation — designed a “1.5°” T-shirt to coax more climate-friendly measures from politicians. All profits from that went to GermanZero. The motto: "Change politics, not climate."


Ageas CEO Hans de Cuyper: Ensuring a Sustainable Future for the Insurance Industry

When Belgian Hans De Cuyper joined global insurer Ageas in 2004, it was as director of insurance management for Asia.

[caption id="attachment_22213" align="aligncenter" width="900"] Ageas CEO: Hans De Cuyper[/caption]

Based in the Hong Kong office, he oversaw activities in China, Malaysia, Thailand and India.

The Asian market was young and growing fast, as millions of people went from working class to middle class — and were considering insurance products for the first time. De Cuyper enhanced the business model, further developing the joint-venture partnerships with leading firms and financial institutions.

So successful have these partnerships proved that today in Asia the company has over 27  million customers served and a profit of €403m in 10 different countries.

Three years after his appointment, he was made CFO at Etiqa Insurance & Takaful, a joint venture between Ageas and Malaysia's largest financial group, Maybank. By 2011, he was member of the executive committee of Maybank and was CEO of Etiqa.

In the years he spent in these roles, he focused on “rebranding and humanising the financial service market”. As he stated in an interview in 2012, “Etiqa is about people. Caring about people is vital for our business sustainability. We break down boundaries, and we aim to change the face of the industry to make life easier, yet tangibly richer, for everyone.

“We deliver best-quality services and go the extra mile for our customers.” That approach paid dividends, with Etiqa registering double-digit growth in the years he was at the helm.

After nine fruitful and rewarding years in Asia, De Cuyper returned to Belgium in 2013 to take on the role of CFO at AG Insurance, Ageas’s Belgian subsidiary, and the country's largest insurance provider. By the time he assumed his role as CEO of Ageas in 2020, AG had maintained its market share serving three million customers.

Today Ageas works on 10 of the UN’s 17 Sustainable Development Goals (SDGs), including health and well-being, decent work and economic growth, and climate action. It also subscribes to the UN’s Global Impact, the UN Principles for Responsible Investment (PRI), and the Principles for Sustainable Insurance (PSI).

De Cuyper has also introduced several programmes to promote and incentivise the adoption of ESG and sustainable values. He explained that “as a services industry, we had to look beyond our own footprint, as both insurer and investor”.

“We are not an industrial or manufacturing firm,” he said, “so we had to look at our workforce and partners first, but also at incentivising the companies we invest in and our 45 millionn customers around the world” The rationale behind Impact24 is quite straightforward for De Cuyper. “The really big opportunity, as I see it, is to incentivise more sustainable behaviour among our customers, making sustainable choices simple, easy and affordable.” Impact24 is a long-term sustainable growth strategy. It is a priority, with the target of making a quarter of its insurance premiums stimulate the transition to a more sustainable world by 2024.  By giving all investments an ESG score — and by making direct investments in areas such as renewable energy and social housing — he believes the strategy will drive innovation, improve understanding of long-term risk, drive growth, and build a more inclusive and sustainable future.

One of the themes he introduced is that of “a great place to grow”. The company recently opened a new office in Lisbon and a fully-fledged AG Campus in Belgium, “where sustainability and wellbeing come first”. The personal development of employees is of paramount importance in creating a dynamic workplace.

Another area that he wants to address is gender equality; 54 percent of Ageas staff are female — but only 27 percent of top management are. By employing two indices, the Glass Ceiling Index and the Gender Diversity Index, as part of its Impact24 strategy, the company aims to increase the ratio in senior management positions by 2024.

In a world facing systemic risks such as pandemics, terrorism, and natural disasters, Hans De Cuyper is seeking to work with governments to ensure that everybody has some form of protection.


Greenbacks for a Green Future: It’s the Cost of Decarbonisation

Accelerating the transition toward low- or zero-carbon emissions is necessary to keep global warming at theoretically safe levels.

That will probably bring price shocks associated with rising metal prices, energy costs, and carbon taxes — what has been called “greenflation”. Greening the economy will also require public spending and redistributive policies.

Moving to Decarbonisation

In the wake of the COP26 Climate Change Conference in Glasgow, the International Energy Agency has updated the CO2 emissions scenarios in its World Energy Outlook, taking into account the most recent pledges. Despite a steeper decline in emissions, the world would still be far from reaching the dreamed-of net-zero scenario by 2050 (Figure 1).

[caption id="attachment_22224" align="aligncenter" width="610"] Figure 1: CO2 emissions in World Energy Outlook scenarios over time, 2000-2050.[/caption]

According to the IEA, if all Glasgow commitments are met, global warming will be bound to 1.8 degrees above pre-industrial levels by 2100. That would be a substantial decrease from the 2.7 degrees which pre-COP policies would have been expected to lead to — but far from the levels promised in the 2015 Paris Agreement.

Estimates by Climate Action Tracker (CAT) suggest that current pledges for 2030 will not deliver the reductions necessary to push long-term effects unless further revisions are made. Figure 2 shows that, while the continuation of current policies would imply a 2.7 degree increase in global mean temperatures, the full implementation of nationally determined contributions (NDCs) — efforts by each country to reduce national emissions and adapt to the impacts of climate change — up to 2030 would lead to more warming by the end of the century. Climate Action Tracker’s pledges-and-targets scenario reflects all NDCs and submitted or binding long-term targets, including the net-zero targets of the US and China. The optimistic scenario of 1.8 degrees requires faster reductions in the coming decade.

[caption id="attachment_22223" align="aligncenter" width="654"] Figure 2: Impacts on temperature estimates.[/caption]

Agriculture, forestry, and land-use correspond to about 20 percent of total greenhouse gas emissions, and forest cover can help remove CO2 from the atmosphere. Preventing deforestation can play a significant role in lowering CO2 emissions, and can even provide a net sink.

Metal Price Shocks

Supplies of renewable energy and biomass need to rise to meet global primary energy needs, and the trajectory towards decarbonisation will bring a sharp increase in the demand for metals, including copper, nickel, cobalt, and lithium. IEA (2021b) predicts that lithium and cobalt consumption will need to increase more than sixfold to meet battery needs.

Figure 3 shows how many minerals used in green technologies will go through a significant surge in demand during the energy transition. Demand for raw materials used in existing clean-energy technologies, such as solar panels and wind turbines, is expected to increase.

[caption id="attachment_22222" align="aligncenter" width="472"] Figure 3: Times compared to 2020 level, demand for minerals in 2040.[/caption]

Such an increase in demand will face a slow-motion supply response. Copper, nickel, and cobalt mines are investment-intensive and take on average of more than a decade from discovery to production, according to the IEA. Lithium is often extracted from mineral sources and brine through salt water pumped from the ground. This reduces lead times to about five years. There will also be the challenge of ramping-up production without going against social and environmental safeguards.

The combination of increasing demand and slower changes in supply could cause the prices of these metals to skyrocket. According to International Monetary Fund projections, if mining were to satisfy consumption in the IEA's net-zero emissions scenario, prices could reach historic highs (Boer et al, 2021). The price of lithium could rise from $6,000 a metric tonne to about $15,000 this decade.

The production value of the four metals could increase up to six times to $12tn in two decades, according to the IMF.

Energy-Cost Shocks

There may have to be a switch to more expensive non-carbon energy alternatives if they are to replace conventional fossil fuels. Green premia — costs of clean technology/price of carbon-emitting alternative — will have to be paid. Figure 4 illustrates this in the case of transport fuels.

[caption id="attachment_22221" align="aligncenter" width="458"] Figure 4: Green premia - cost of zero carbon alternatives vs traditional fuels.[/caption]

The good news about such replacement is that the evolution towards cleaner technologies with declining costs is happening. The bad news is the presence of obstacles to such investments — particularly in the case of green infrastructure in lagging countries.

Fossil fuels have also provoked price shocks. The expectation has been that their prices will fall as the transition pushes down demand for them. Supply conditions have also deteriorated because of the drop in investment in oil wells, natural gas centres, and coal mines.

In 2021, the lack of investment was one of the causes of the spike in the prices of the three energy commodities. Oil surpassed $81 a barrel after OPEC and allies such as Russia, part of the OPEC+ alliance, at a meeting last year, resisted calls to increase production. Unlike what has been seen since 2015, when oil and gas prices changed levels, this time US gas and shale oil were not ready to close the gap. The trajectory of fossil fuel prices will not be steady.

Public policy measures seen as favourable to the energy transition already place a price burden on fossil fuels. Such policy measures include a tax on carbon, elimination of remaining subsidies, mandatory transparency and sanctions on financial assets, and future bans on internal combustion engines.

We have experienced the first energy shock of the green economy era. Or the last energy shock of the fossil fuel era. In 2021, oil, coal, and gas prices rose 95 percent. This year's strong economic recovery has been confronted by oil stocks at levels six percent lower than usual, as well as gas stocks in Europe at just 86 percent of previous levels, and below 50 percent in the case of coal in China and India.

At the same time, besides green premia still paid to replace carbon-emitting technologies with clean alternatives, existing stocks of investments in renewable energy have been shown to be insufficient to serve as a full alternative.

The year's energy shock reflected climatic phenomena — low wind in Europe, droughts affecting hydroelectric production in Latin America, floods in Asia affecting coal delivery — but also that investments in renewable energy are evolving below what is necessary for the transition.

Higher input prices in energy production and use, as well as accelerated spending on climate change mitigation, will be tolls on the decarbonisation route.

Road to Decarbonisation

The road ahead will demand a significant change in the relative prices of goods and services to reflect their carbon-intensity. Gaspar and Parry propose that, at the international level, measures be taken to reach a carbon price equal to or greater than $75 per tonne by 2030.

Such a carbon price may be established and charged explicitly and/or indirectly through regulations or limits on use. Decarbonisation will be negligible if the price of carbon remains that of a “free good” from Nature. Carbon prices will also have to be among the factors influencing people's behaviours and lifestyles.

Transitioning away from fossil fuels and carbon-intensive production and consumption implies a wide-ranging switch to emissions-neutral alternatives in all sectors. Policymakers can stimulate this transition by raising the implicit cost of emissions. The road to decarbonisation may entail higher costs along the way.

Greening the Economy

The decarbonisation trajectory will also have consequences for public accounts. Necessary public expenditure on infrastructure to enable the transition will be required. Transitioning to a net-zero emissions economy will necessitate investment flows towards mass deployment of green electricity and electricity storage.

The trend will be one of increases in public debt, though in this case without intertemporal injustice, as future generations will benefit.

Decarbonisation could have regressive income impacts. Real estate to be rebuilt or retrofitted corresponds to the largest share of assets of people in the lower half of the income pyramid. Direct carbon taxation will have different impacts on different urban groups. Compensating expenditures for regressive carbon pricing impacts will be demanded. It will be important to ensure income-transfer mechanisms to mitigate the regressive impacts.

Workers will have to move from carbon-intensive activities to greener substitutes. There will be not only the challenge of labour reskilling, but also of ensuring that new jobs are created in large enough numbers in dynamic activities. It is known that the production of electric cars requires less labour than that of combustion engine vehicles.

There will also be accelerated obsolescence of existing stocks of machinery and equipment, buildings, and vehicles, and intangible assets associated with carbon-intensive activities. The counterpart will have to be accelerated investment in new assets to replace them.

Bottom Line

What about GDP? On the one hand, there will be capital destruction, in addition to relative price shocks and the transitional impacts of reduction of potential growth. If the need for higher investment rates in GDP accompanying decarbonisation collides with supply capacity limits, consumption will have to adapt downwards.

High metal prices, carbon taxes, and accelerated obsolescence of capital associated with fossil fuels: these are tolls to be paid. “Greenflation” will be a price worth paying.

And cleaner technologies will offer opportunities to increase productivity.

By Otaviano Canuto


Ramón Martínez Carrera: A Sustained Upward Trajectory — Ethical Strategy Proves a Winner

Industry pioneer Active Capital Reinsurance, Ltd. (Active Re) was founded in in Barbados in 2007, and now has offices in the US, Panama, and Spain. Chief executive Ramón Martínez Carrera reflects on the company’s guiding principles...

Throughout its 15 years of operation, Active Re has exhibited a sustained upward trajectory, driven by the vision of its founder and executive chairman, Juan Antonio Niño.

[caption id="attachment_22232" align="aligncenter" width="900"] Chief Executive: Ramón Martínez Carrera[/caption]

In recent years, the strategy that I have been responsible for and have been implementing with the management and technical teams is focused on continuously reinforcing the pillars that support our vision of being global, specialised, and innovative, in a way that achieves benefits for all.

Looking to the future, I see Active Re as the preferred reinsurer for local and regional partners, active in fast-growing emerging markets, where we have equally contributed and learned.

Disciplined underwriting, with an aversion to catastrophic exposures and appropriate financial security for the capacities offered, has led to sustained growth, diversification, and profitability in our portfolio. Financial strength, with good operational performance and sound integrated risk management, is the main rationale for the A- (Excellent) rating and positive outlook given to Active Re by AM Best.

The future of the industry is closely linked to increasing innovation and the adoption of paradigms with a greater environmental, social and governance focus.

Along with proper financial control, we promote a corporate culture that encourages innovation at all levels, as well as inclusiveness, respect for universal values, and compliance in all areas and markets where we operate.

To keep pace with technological progress, Active Re will continue to improve its models, foster long-term partnerships, and stimulate professional talent. Our interest in personal, life and health insurance ensures that we follow the evolution of modern consumer financial services platforms, digital commerce and new forms of health and wellness care.

We work in an industry that is directly impacted by climate change, as evidenced by statistics on the increased frequency and severity of catastrophic natural events reported in various latitudes. This marked trend has been compounded in the past two years by the pandemic, disruption in supply chains, and, more recently, geopolitical conflicts and economic volatility with rising inflation. Only the joint action of the private and public sectors, together with international agencies and organisations, will make possible the dream of living in a world that is increasingly resilient, full of opportunity and with less inequality.

I am very optimistic about the business world in which we work. The risk landscape has changed, bringing with it challenges, but also opportunities. Active Re has demonstrated its resilience in these difficult times, absorbing market volatility and expanding its service and solutions offering.

We have successfully entered new markets and lines of business when other competitors have gone in the opposite direction. Our business model and organisational structure are innovative, and we are continuously improving them. We attract and invest in a highly qualified and experienced team of professionals across four generations, representing diverse cultures and nationalities.

This diversity, together with a co-operative and inclusive organisational structure, has been a key factor in better serving our customers and strategic partners.

When I reflect on the personal qualities required to lead an organisation such as Active Re, the classic concepts of knowing how to lead, motivate, reinforce work morale, apply participative formulas, decide and act come to mind.

But new times demand more from leaders, to guide organisations to the efficient fulfilment of their strategic objectives. I have learned that communication is also about listening and interacting with the team and with customers; breaking down internal barriers between physical, digital, commercial and support activities; supporting collaborators.

Trust, accountability, and responsibility go hand-in-hand, and concern us all equally. Opening spaces for discussion and learning from younger employees on specific and important projects is vital for succession planning.

More than half of my professional life has been dedicated to the insurance and reinsurance industry. Each working day represents a new challenge — and a new reason to study until it is solved, with the help of all those who have joined me in the endeavour.

At Active Re, we have an agile, collaborative, entrepreneurial style, focused on the client and our people. It is a source of satisfaction for senior management to know that Active Re is not only recognised for its financial and operational performance, but also for its working environment, employee satisfaction, innovative approach, and ability to adapt and improve in the face of extraordinary events.

Ramón Martínez Carrera


Lutz Schwenke: Life — and Business — on an Ocean Wave

Devon has some of the best surfing beaches in the UK — a fact which may have played a part in persuading a young Lutz Schwenke to study at the University of Plymouth.

[caption id="attachment_22265" align="aligncenter" width="900"] Founder & CEO TWOTHIRDS: Lutz Schwenke. Photo: Wooden Film[/caption]

But it was also the knowledge that the institution is ranked number one in the world for its marine ecosystem research which drew the German-born founder (and future CEO) of Spanish fashion brand TWOTHIRDS to England.

While the Devon coast offers its own chilly challenges, Schwenke’s passion for waves began in warmer waters. At the age of 12, he was sent to Hawaii’s Maui Ocean Academy, where he acquired a love of surfing — and a lasting appreciation of marine ecology. As a youngster, he was greatly influenced by the films of French marine conservationist Jacque Cousteau, and over the years became increasingly concerned about the ecological threat to the world’s oceans.

He founded TWOTHIRDS 12 years ago to create a clothing brand which combined surf culture and environmentalism, under the motto: “Protect what you love.” (The company name is a reference to the fact that oceans cover two-thirds of the planet’s surface.)

Further inspiration came to him on surfing trips to San Sebastian on Spain’s Catalonia coast. “I liked the idea of creating a brand that showed passion for the sea, and taking care of it,” he says. “I have a special bond with the water. It’s a very important part of my life.”

The 39-year-old entrepreneur is married, with three daughters, and remains as enthusiastic as ever about surfing. He writes a blog about his favourite beaches, and during lockdown missed the sport so much he posted a tongue-in-cheek video to Facebook. It showed Schwenke and his dog, Lala, balancing shakily on a surfboard in front of a home-cinema big screen of breaking waves — and garnered plenty of views.

“Founding a brand is a journey back to yourself,” he says. “It forces you to define who you are, and what you truly stand for. Then there’s this incredible moment when everything aligns, and the brand becomes a pure expression of your values.”

TWOTHIRDS employs 35 people, creating clothing from sustainable sources that have zero impact on the planet. All the products are climate-neutral, and made from natural materials including cotton, hemp, fibre from trees — and even algae. The company’s Barcelona HQ is entirely powered by solar panels, and its transport fleet is electric. The firm uses trusted suppliers in Portugal, France, Italy and Spain, where fair labour is an overriding principle — and donates 10 percent of gross profits to ocean conservation.

Schwenke’s greatest criticism of the traditional clothing industry is the waste it produces, particularly the amount of “deadstock” — items manufactured but never sold because of changing vogues. “Fashion is fickle,” he says. “We are not.” He was clear from the start that his garments should be durable, but also free from the usual constraints of fashion. TWOTHIRDS designs rise above the volatility of trends, he says.

When he began the company, Schwenke assumed his target market would be the male surfing set, where robust and stylish clothing was essential. But it soon became apparent that the brand’s ecological message was attracting a broader clientele. The target customer in 2022 is a woman in her 30s who takes care of her health and fitness, and eats organic food…

Lutz Schwenke gained a BA honours degree from Plymouth before completing an MA in Economics at the University of Hamburg. He later worked for the United Nations, researching sustainability initiatives, before starting TWOTHIRDS in 2010.


Patrik Lundström: Break on Through to the Green Side of Clothing Production…

[caption id="attachment_22275" align="alignright" width="300"] Renewcell CEO: Patrik Lundström[/caption]

Every entrepreneur wants to build a business on a breakthrough process; not many have done so. On the back of a breakthrough process, perhaps; but true pioneers are thin on the ground.

We have one for you here, though, all the way from Sweden: meet Patrik Lundström, CEO at Renewcell. Lundström has taken an existing idea — recycling — and given it such a novel spin that an entire industry has taken note.

While recycling is increasingly popular across industries and sectors, Renewcell operates in one that thrives on the new, the fresh, the avant garde: the world of fashion. Well, perhaps a precursor to fashion — but raw materials have to come from somewhere. Lundström has ensured that the “somewhere” is beyond reproach when it comes to sustainability.

Renewcell’s breakthrough process is that rarest of fish, a true world-first: it produces 100 percent recycled fibre pulp, at scale. It receives used clothes and textile production waste with high cellulosic content, such as cotton. After being denuded of zips, buttons and baubles, the raw materials are shredded and chopped into a slurry. Contaminants are separated and filtered-off; the remaining goop is Circulose-branded dissolving pulp, which is formed into sheets. This is forwarded to fibre producers as a replacement for new cotton, oil and even wood.

Circulose fibres are indistinguishable from viscose derived from other sources; the only difference is in the circularity. Brands use them in place of virgin materials to reduce environmental impact. The best part? There’s no compromise in terms of quality.

The patented process tech was developed in conjunction with researchers at Stockholm’s KTH Royal Institute of Technology. For the first five years — it was founded in 2012 — Renewcell was little more than a research project. “In 2017, we started our demonstration plant in Kristinehamn,” Lundström told Fibre2Fashion magazine, “where we produced at industrial scale and launched clothes made with Circulose in stores with global brands.”

Taking things to the next step — to commercial scale, at a modern plant in Sundsvall — is happening this year, with 100 employees already lined-up and ready for action. Maximum production? An impressive 60,000 tonnes per year, if things go according to plan. And there’s no reason to suspect that they won’t.

In the increasingly aware fashion industry, demand for Circulose products is off the hook — and permanent, positive change for relevant industries is a real possibility. Hundreds of thousands of tonnes of used garments that would otherwise go to landfill are now riding on the hips and backs of trendsetters and influencers.

And this, believes the Renewcell CEO, is just the beginning. His firm is partnering with suppliers of post-consumer and post-industrial textile waste to obtain material with a minimum of 95 percent cotton content, compliant with its supplier code of conduct. Contracts for more than 40,000 tonnes of waste have been signed.

Lundström is well qualified for the task, as well as having the nous to spot an opening and create a niche that benefits just about everyone. He has a Masters degree in chemical engineering from KTH Royal Institute of Technology, and an executive MBA from Stockholm School of Economics.

And he’s hands-on, in terms of involvement. He holds, personally and through the company, 49,029 shares and 22,236 warrants that entitle to the subscription of 1,445,340 shares — as well as 49,895 warrants from the latest incentive programme that entitle him to 49,895 shares in the company.


Northern Ireland Shilly-Shally has Experts Fearful of New Trade War

[caption id="attachment_22278" align="alignright" width="300"] Northern Ireland: Belfast[/caption]

The UK’s disentanglement from the European Union has been a source of instability in international trade, and is now giving rise to a more serious concern: the possibility of a trade war.

Unrest has escalated since the UK government tabled legislative reforms in mid-June. If approved by Parliament, the proposals would allow Westminster to unilaterally disregard parts of the Northern Ireland protocol that was agreed in 2019. This has prompted a backlash from Brussels, with officials losing faith in the trust and credibility of the British government. The resulting uncertainty has quickly spread to the business community.

“We are hugely concerned that the introduction of the government’s Northern Ireland Bill risks significant harm to businesses in London and right across the whole of the UK,” said Richard Burge, chief executive of the London Chamber of Commerce and Industry.

In a statement issued after the proposed legislation was published, he said the bill “means we are now teetering on the brink of a trade war with the EU” and warned of “further economic pain and falls in investment”.

In terms of trade, the UK government’s primary concern is the difficulty of moving goods between Great Britain and Northern Ireland. The protocol requires that customs controls are applied at ports in Northern Ireland, to avoid the need for checks or infrastructure on the land border with the Republic. This compromise was reached to respect peace-keeping measures set out in the 1998 Good Friday Agreement, while minimising the risk that goods could enter the European Single Market without controls.

The problem with this arrangement is that all goods moved from Great Britain to Northern Ireland are treated as if they are being imported into the EU, unless the importing company can prove they will remain in Northern Ireland. Regulatory controls apply to some goods, such as agri-food products, regardless of the destination market. Traders are required to make detailed customs declarations for what is essentially intra-UK trade.

The UK government says the result is “burdensome bureaucracy and paperwork” on businesses — including those that do not trade with the EU.

There is a strong economic incentive for Westminster to ensure smooth trade. Ireland is the UK’s sixth-largest trading partner, with UK companies exporting goods worth £21.8bn to the country in 2021. Imports from Ireland totalled £13.9bn over the same period. Of those totals, just 14.7 percent of UK exports originated in Northern Ireland, while 20.4 percent of imports were to Northern Ireland.

The UK proposal, as outlined in a paper published alongside the draft legislation, would result in the introduction of “green” and “red” lanes for goods. The green lane would be open to approved members of a trusted trader scheme, overseen by UK authorities, and would allow goods due to remain in Northern Ireland to be moved without controls. The red lane would apply to goods exported into the European Single Market, and would provide for EU customs and regulatory checks.

Officials hope that easing the burden for businesses moving goods across the Irish Sea could offset some of the impact Brexit has had on the UK’s trade flows. A report by the Centre for European Reform (CER), a Brussels-based think tank, estimates that post-Brexit goods trade was down 13.6 percent. By comparing the country’s economic performance to a model economy based on a basket of comparable nations, CER suggests Brexit resulted in a 5.2 percent hit to Britain’s GDP last year.

For the EU, the UK’s proposed changes to trade arrangements is unpalatable. In a statement delivered two days after the UK government published its draft legislation, European Commission vice-president Maroš Šefčovič characterised the move as a unilateral breach of international law.

“There is no legal, nor political, justification whatsoever for unilaterally changing an international agreement,” he said. “Opening the door to unilaterally changing an international agreement is a breach of international law as well. Let's call a spade a spade: this is illegal.”

EU officials say the immediate impact of the UK’s decision has been an undermining of trust and credibility. Šefčovič noted that Brussels negotiated in good faith, acknowledging practical difficulties in implementing the Northern Ireland protocol and offering flexibility in certain areas without the need for changes to the agreement itself. Proposed measures included cutting customs paperwork, reducing sanitary controls, and simplifying certification processes for vehicles carrying goods.

The European Commission has been specific in some of its offers. Proposals set out in October 2021 would allow British sausages — generally prohibited for import into the EU — to enter Northern Ireland with certification. Products of animal origin, such as cheese or chicken, would have physical checks reduced by 80 percent, while trucks transporting a range of different food products would be permitted to provide a single document for all goods on board.

Alarmingly for businesses, the EU has retaliated with legal action. Infringement proceedings initially brought in March 2021 but shelved six months later are now being revived. Two new charges are being brought against the UK: failing to carry out legally mandated checks on goods arriving in Northern Ireland, and failing to provide trade statistics deemed essential to the workings of the Single Market.

The confrontational tone has accelerated talk of a potential trade war. The UK’s Institute of Export and International Trade has launched a survey to ascertain the potential impact that would have on its members. It cites possible actions as the imposition of tariffs on goods exported to, or imported from, any European Union member state, as well as increased certification standards.

Punitive trade-related actions against the UK would be a drastic option. Officials are reportedly reluctant to escalate the conflict, citing the need for a united European front against Russian aggression. The UK and EU have been aligned in imposing sanctions following Vladimir Putin’s invasion of Ukraine. There is little appetite to punish EU businesses reliant on access to the UK market at a time when the continent faces soaring energy and food prices.

By initiating a trade war via tariffs, restrictions or tougher certification standards, the EU would in effect be breaking the Withdrawal Agreement signed in January 2020. Throughout its negotiations with the UK, the EC has emphasised the primacy of the rule of law, specifically the importance of internationally agreed texts. Even in his shot across the bows after details of the UK’s draft legislation emerged, Šefčovič emphasised the need for a negotiated solution.

To abandon that stance could risk ceding the high ground.

By John Basquill