New ways of doing old things

New ways of doing old things: Our world is falling apart – it is getting increasingly hot and dry. As we write, multiple wildfires are ravaging the world from Oregon, Greece and Indonesia to Argentina; and a chunk of ice, twice the size of Manhattan, has broken off in the Arctic. Clearly, the old ways of doing things must go. So this month, we explore new ways of doing old things from cowless milk, alt-protein VC funds to new ways of looking at water from water handprints, more effective disclosure and  climate and water valuation aids. We also take a look at fashion which is falling apart at the seams – can it continue without an extreme makeover? Read on.

We kick-off with lab-grown, cow-free milk by TurtleTree labs, the winner of the 2020 Liveability Challenge. That’s right, no cows, cell-based milk. Why? Because cows burp and fart methane; plus they are mainly fed soy making dairy one of the big bad boys of climate change. Oh and because of how much stuff they eat, cows are highly water intensive to rear. TurtleTree Lab’s milk eliminates these environmental and welfare issues and still gives us milk so no cereal bowl will go dry. Robin Hicks, Deputy Editor at Eco-Business expands on this plus other prize winning innovations.

These innovations need funding and investor interest in seeding the alternative protein industry is at an all-time high. Green Queen’s Sally Ho tells us how Lever VC just secured a capital commitment of USD23 million for investment in early-stage alt-protein companies. Asia is clearly bullish, stumping up around 70% of the pot. Find out what the pandemic means for the future of alt-protein plus other key trends.

When we think livestock, we think food but you should also think fashion where it manifests in the form of cashmere and leather. So, what will happen to fashion with the rise of alternative proteins – when we no longer need to grow cattle for beef – are we at the beginning of the end of leather?  Well, that isn’t its biggest concern at the moment… Fashion’s going bankrupt with 20+ bankruptcy filings since April this year between fashion brands and retailers.  Could the rise of eco-fashion and the pandemic force it to undergo an extreme makeover? Can fast fashion survive? We take a closer look.

In Asia, a tongue-in-cheek description of NATO is “No Action Talk Only”. Fashion along with other FMCG sectors such as F&B and electronics have long been trying to change its dirty and thirsty ways – so why hasn’t there been more progress? Is it because they are just “NATO”? Well, the CEO of Water Foundry, Will Sarni, blames the water footprint.

Corporate water stewardship strategies have stalled globally because the widely used water footprint approach is limiting. Instead, Sarni calls for a shift to the water handprint – a positive & broader strategy that changes mitigation into opportunity. He shares examples from the ICT sector.

To do better, corporates also need to understand their water-related risks. Worryingly, many don’t yet Francesca Recanati of the Climate Disclosure Standards Board (CDSB) says we are already feeling the sharp bite of water & climate risks. Given this, Recanati is leading CDSB’s Technical Working Group on Water-related disclosures in developing guidance for water-related disclosure to facilitate assessment of risks. And yes, it will align with TCFD. See who’s part of this working group here (we are) and learn more on how you can participate here.

But what’s the use of disclosure if we still don’t know how to value water and climate risks? This is an entirely new field as we have never had to value these risks before. With the cost of ‘physical climate risk’ at USD2.98 trillion from 2010 to 2019, more research and tools have surfaced to aid their projection and valuation. One new way forward is using Climate Risk Matrices – a sector specific approach to assess portfolio risk is led by the Intact Centre on Climate Adaptation (ICCA). Already completed for two sectors, see how they work with ICCA’s Kathryn Bakos.

If it ain’t broke, don’t fix it, but it is broke and we must fix it. Unfortunately, if we do not manage to keep temperatures down, we will edge closer to the brink of collapse in the natural world and in our financial systems. While regulators are scrambling to prepare for such shocks and we are pleased to see the NGFS recently publish an “Overview of Environmental Risk Analysis”.

That said, we are disappointed to see that there are NO examples of transmission of chronic environmental risks to financial risks for water scarcity or sea level rise. In short, the financial sector is still “NATO” on the two chronic binary risks. This under-pricing of tail risks reinforces the mis-allocation of capital towards “old ways” instead of “new ways” of doing things.

Ultimately, the financial sector is also going to have to find a new way of doing old things – not just for products in the form of ESG funds, green finance, fintech and so on but in rethinking risk management. Here, we definitely cannot afford it to be broke before it’s fixed.

So don’t be “NATO”, recognise the imminent natural horrors we will face and be solutions orientated.