By: Laks Ganapathi, Founder and CEO, Unicus Research

“Unsubstantiated, shrill, partisan, self-serving, apocalyptic warnings are ALWAYS wrong.”- Stuart Kirk, HSBC

A passive-aggressive quality has always been an odd tenor to discussions among climate scientists, policy wonks, and politicians. I think it can be traced to the fact that everyone involved has to dance around the obvious truth, at risk of losing their status and influence. But then, last week, Stuart Kirk did it. He spoke what many were thinking.

The global head of responsible investing at HSBC Asset Management, Stuart Kirk, surprised the investment world after accusing central bankers and policymakers of overstating the financial risks of climate change.

Speaking at a Financial Times Moral Money event earlier this month, Stuart Kirk said that throughout his 25-year career in the finance industry, “there was always some nut job telling me about the end of the world.”[1]

Is Stuart, right? Is he saying what most asset managers and policymakers are thinking? Who is leading this climate-change revolution?

One of the more uncomfortable, little-discussed aspects of global warming is that we’ve reached the point where sharp cuts in emissions alone are unlikely to be enough to avoid significant temperature increases.

Most research thought leadership and even the S.E.C. claim that investors are spearheading the climate-change revolution. But unfortunately, after Stuart’s blunt comment, I am no longer sure whether anyone is serious about climate change.

Are we serious about climate change? Who cares?

In the interest of being blunt, we are not serious about climate change – at least, not yet. Why?

To initiate change involves facing the truth, accepting that we are late, and facing an existential crisis – only then will we be inspired to take steps.

We are facing an increasing threat of food and water scarcity soon. We must address the immediate threat instead of gathering in groups and discussing the issues.

Here are the immediate threats that will soon be at our doorstep if we do not take appropriate action.

The Rising Risk of Global Food Crisis and water scarcity

The pandemic has unmasked the structural flaws in logistics and our absolute disregard for the preparedness for what is about to come. Since the dawn of 2020, we have been bombarded with the pandemic, supply chain disruptions, inflation, and war.

The war in Ukraine, scorching temperatures in India/Pakistan/United States, and megadrought in the Southwest U.S.A. are testing the limits of human survivability.

Prompted by a severe heatwave in most of the country, India has cut the wheat harvest prospects. The export ban comes amid disruption in global wheat supplies due to the ongoing war between Russia and Ukraine, which are major exporters of the food grain. India’s move has further threatened to squeeze the global wheat supply.[2]

In simple terms, the heatwave has ripple effects on the world’s food supply. Wheat prices have risen more than 60 percent this year, driven up by disruption from Russia’s invasion of Ukraine. India’s announcement drew sharp criticism from the Group of Seven industrialized nations’ agriculture ministers meeting in Germany, who said that such measures “would worsen the crisis” of rising commodity prices.[3]

The heatwave is hitting wheat-growing regions particularly hard, with temperatures hitting 44 degrees in Punjab and 42 degrees in Uttar Pradesh this week. What adds to India’s heatwave woes is that it has to now imported coal to keep up with its power and energy requirements which, thanks to Russia’s war, is driving the coal prices through the roof.

Enforcing disclosures and initiating a non-stop climate-change campaign doesn’t add direct value or initiate change to the immediate crisis.

How Extreme Heat Worldwide Will Impact Production:

1. Extreme heat means fewer work hours = increased absenteeism = less productivity
2. Increased health impact (stroke, kidney issues, etc.) = lack of affordability = mass death
3. Degradation of grid performance
4. Air conditioners and blackouts
5. Economic death

William Ru,  Illinois State University, emeritus professor of sociology. Rau has been studying climate change and fears increasingly frequent heat waves will pose a heightened threat to people living in some of the poorest neighborhoods of Peoria, Illinois.[4]

Peoria, Illinois, is not an isolated incident. The West’s climate change-induced water crisis is now triggering a potential energy crisis for millions of people in the Southwest who rely on the dam as a power source. Over the past several years, the Glen Canyon Dam has lost about 16 percent of its capacity to generate power. The water levels at Lake Powell have dropped around 100 feet in the last three years. As water levels decline, so does hydropower production. The dam harnesses the gravitational force of the Colorado River’s water to generate power for as many as 5.8 million homes and businesses in seven states, including Nevada and New Mexico.

Bryan Hill runs the public power utility in Page, Arizona, where the federal dam is located and likens the situation to judgment day.[5]

The global food system’s previous supply-demand scenarios were mostly encoded around weather and other supply-related events. However, the global pandemic has tested the food system’s resilience in the past few years. But now, we are in an unimaginable situation: a war of this scale in Europe, in such a critical food supply hub as the Black Sea, especially regarding wheat and fertilizers.

This instability starts to create a whiplash effect in the food supply chain. It’s hard to project the implications fully, but this crisis will have apparent secondary effects on other breadbaskets, like Brazil. In addition, Russia and Belarus are critical for exporting fertilizer, the most crucial yield driver for farmers globally.

This event has also hit us at a point where we’ve seen unresolved challenges from sustained high prices for agricultural commodities and fertilizers since late 2020. We’ve seen corn prices, for example, at well above $5 per bushel since early 2021—well over a year now.

STOP Tone-deaf Attitude towards Climate Change.

The world food crisis has two faces. Here in the United States, shoppers stare in disbelief at the rising price of milk, meat, and eggs. But elsewhere on the globe, as many as 81,000[6] people face famine conditions in parts of Somalia as drought persists. In addition, humanitarian funding dwindles, and global food prices soar, partly thanks to the Russia-Ukraine war. In 2011, famine conditions were estimated to have killed a quarter of a million people in Somalia.

The Horn of Africa region is facing the driest conditions in more than four decades after three consecutive rainy seasons failed, with weather patterns indicating the rains are likely to fail again this year, according to the United Nations’ World Food Program (W.F.P.).

The strain on U.S. consumers, grappling with the sharpest increase in grocery prices in years, is small compared with the starvation in most countries in the African continent.

The U.N. estimates that global food prices have risen by almost one-third in the past year, fertilizer by more than half, and oil prices by almost two-thirds. As a result, according to U.N. figures, the number of severely food-insecure people has doubled in the past two years, from 135 million pre-pandemic to 276 million today. Now, more than half a million people are experiencing famine conditions, according to the U.N., an increase of more than 500% since 2016.

According to the report, the number of people facing extreme hunger has doubled in Ethiopia, Somalia, and Kenya since last year, from roughly 10 million to more than 23 million. Across the three countries, the report notes, one person is likely to die every 48 seconds from acute hunger-related causes stemming from armed conflict, COVID-19, climate change, and inflationary pressures worsened by the war in Ukraine.

In India, a devastating heatwave has upset the nation’s wheat harvest, driving up prices worldwide for the staple commodity.[7]

The world is unprepared for the crisis unfolding now. One exception is China, which has significantly increased its strategic reserve by over 70 percent since 2008. But many other markets worldwide are not at the same level of readiness.

What can we do?

1. Stop politicizing everything.
2. Invest in sustainable farming – help maintain soil quality, reduce erosion and preserve water.
3. Stop platitudes and cozy debates on climate change. Instead, take action by supporting
   • Domestic food production
   • Support farming
   • Subsidize farming instead of linking E.S.G. goals to executive pays
   • Plant more trees
   • Paint roof whites (dark roofs absorb and retain heat), and most importantly,
   • BE PREPARED – for blackouts, food scarcity, water scarcity, and extreme temperatures.

Solutions will not be easy to sort out since the dramatic food price escalation has numerous causes. Skyrocketing oil prices have strained every stage of food production, from fertilizer to tractors to transport. Eliminating hunger and malnutrition and achieving wider global food security are among humanity’s most intractable problems.Higher food prices have not helped, but price levels are not the fundamental problem. High prices impose undeniable hardship on the poorest consumers, including many subsistence farmers whose production is insufficient to meet their consumption needs. Yet the persistence of global hunger–the chief manifestation of food insecurity–is a chronic problem that predates the current period of higher food prices.

Next time you talk about climate change over a cocktail, think of ways your organization can add direct value to the betterment of the Environment, Society, and your internal Corporate Growth (E.S.G).

About the author:

Laks Ganapathi is a researcher in clean energy – focusing on climate change, sustainability, EVs, and ESG. Laks is also the Founder and CEO of Unicus Research. Unicus is a long/short investment research firm dedicated to asset managers, wealth managers, and investors. A key differentiator for Unicus is that they strive to be the voice of reason to the investment community in the ocean of disinformation. They are here to gain their investors’ trust.

[1] https://www.ft.com/content/1716d9fb-4c8f-4d05-a6b4-bb02a48a73a4

[2] https://timesofindia.indiatimes.com/business/india-business/wheat-export-ban-indias-extreme-heat-wave-is-having-ripple-effects-on-worlds-food-supply/articleshow/91594379.cms

[3] idib

[4] http://thecommunityword.com/online/blog/2020/01/29/isu-professor-peoria-vulnerable-to-killer-heat-waves/

[5] https://www.cnn.com/2022/04/30/us/west-drought-lake-powell-hydropower-or-water-climate/index.html

[6] https://www.reuters.com/world/africa/somalia-faces-pockets-famine-amid-soaring-food-prices-drought-un-2022-04-12/

[7] https://www.npr.org/2022/05/23/1100592132/united-nations-food-shortages