Go Green

The IPCC 6th Assessment: Should we Worry?

By:  Steven L. Yamshon, Ph.D., Managing Principal

The United Nations (UN) Intergovernmental Panel on Climate Change (IPCC) just released their 6th climate change assessment and now the UN is calling for a “red alert”.

Although I believe that climate change is mainly caused by human activity and there is ample evidence to demonstrate this, climate models are far from perfect. It would be impossible to make any prediction with complete accuracy so far into the future because there are too many variables. These variables are constantly shifting because one variable affects the other. Climate change models are useful in letting us know what direction we are going in and what we need to do about it. I believe that a good majority of us want something to be done about climate change, but does it call for the immediate and drastic reshaping of global economies and lifestyles? I think not. The reality of the situation calls for calm and good thinking. Remember, the IPCC is also a political document that is designed to spur governments into action, something that governments do poorly. Rapidly decarbonizing while destroying the global economy and people’s source of income is not the answer. Combating climate change is extremely important but it is only one of the 9 planetary boundaries that are being affected by humans. The loss of biodiversity and biochemical flows are just as important to our survival as climate change is, but those two boundaries get much less attention. According to the Stockholm Resilience Center, climate change is in a zone of uncertainty (Chart 1) but not beyond that while habitat loss and pollution are at the critical level.

Chart 1: Stockholm Resilience Center’s Planetary Boundaries

Susan Solomon, of MIT, wrote a paper in 2009 that stated carbon can remain in the atmosphere for up to 1000 years. Solomon also assessed that climate change is irreversible and that it may take at least 100 years for greenhouse gasses to begin to dissipate. You can access Solomon’s paper here: https://www.pnas.org/content/106/6/1704.

According to Solomon, the complete cessation of greenhouse gases will have little effect in the foreseeable future. In other words, the change in temperatures due to climate change or otherwise, cannot be turned on and off like a light switch. It takes time.

Does this mean that we should give up and go along our merry way and continue to spew out greenhouse gas emissions, deplete our natural resources, and pollute our oceans, streams, and waterways? The clear answer is NO! What we need is more investment to balance our needs with the environment and I believe this is achievable. By doing so we can move towards a circular economy (Chart 2) which will better balance resources used with resource needs.

Chart 2: The Circular Economy

Policy makers need to think about mitigation and adaption. If Solomon is correct, then people will have to think about adapting to a warmer climate. This might involve moving out of fire prone areas or using less water. It could mean reducing electricity usage by turning out the lights at night. Do you drive by empty high rise office buildings at night and wonder why all the lights are on in the various offices? I do!

Mitigation is where technology and investment can play a large part in helping combat greenhouse gasses that will accumulate in the atmosphere, not for now, but for the future. There are two types of mitigation technologies that can help reduce greenhouse gasses: Negative Emission Technologies that remove and sequester carbon from the air and SRM Technologies which is a type of climate engineering in which sunlight would be reflected to space. Both are moonshot types of projects but remember so were many other innovations such as gene editing, cloning and the personal computer.

What is needed is more investment in mitigation and adaption strategies that will start to really combat the long-term problem of climate change. Enough time has passed since the adoption of the UN Social Development Goals in 2015. Now we need to ask how we are progressing, and the evidence doesn’t look good. On average the world will need to spend about $800 billion per year on developing these new technologies if we are to make a dent in climate change for the future. Investing in green technologies is good for the planet and good for you and presents an opportunity for investors.

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s web site or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please see important disclosure information here.

Congrats Dr. Steven Yamshon on your new certificate “Climate Change Awareness & Leadership”

“Continuous learning is the minimum requirement for success in any field.” – Brian Tracy

We are proud of BFSG’s Steven Yamshon, PhD, for his new graduate certificate “Climate Change Awareness and Leadership”. This adds to his other degrees in environmental resources and advanced certifications in sustainability and climate change. BFSG’s Environment, Social, and Governance (ESG) investing efforts are spearheaded by Dr. Steven Yamshon and if you’d like to learn more about our ESG portfolios, please feel free to talk with us.

Restore our Earth and Start Reducing Your Carbon Footprint

Today we celebrate Earth Day and sticking to the theme of this year’s Earth Day, “Restore Our Earth”, this blog post is focusing on restoring the world’s ecosystems by helping you reduce your carbon footprint.

Did you know that meat and cheese are some of the most carbon-intensive foods to produce?(1) Globally, 77% of agricultural land is used to produce meat and dairy and according to The Land Report, the meat and dairy industries are on track to be the world’s biggest contributors to climate change, outpacing even the fossil fuel industry. In just the U.S. alone, 41% of U.S. land in the contiguous states revolves around livestock.(2) According to the Environmental Protection Agency (“EPA”), the methane produced by agricultural waste (biomass, inedible crop waste, livestock manure) accounted for 36% of the U.S. total methane emissions between 1990 and 2017. While methane represented about 10% of total U.S. greenhouse gas emissions in 2017, the EPA notes the comparative impact of methane is “25 times greater than CO2”.

Having a balanced diet is just one way to reduce your carbon footprint and we invite you to explore the many other ways you can reduce your carbon footprint by experimenting with the MIT Interactive Climate Change Simulator, EN-ROADS. Click HERE to test out the EN-ROADS simulator.

You may be asking how this ties in with my investments and BFSG? Many of our clients are expecting more than just shareholder returns from the public companies in which they invest. They want these companies to have management and leadership in place that is mindful of the footprint that they leave in the world. We agree companies should uphold their basic responsibilities to people and the planet. Furthermore, we believe exposure to environmental, social and governance (“ESG”) factors can meaningfully impact the long-term sustainability of a company’s business.  We are now proud to say that we have several different new ESG investment strategies to meet our clients’ investing goals and objectives. Whether you are passionate about environmental opportunities that will reduce greenhouse gasses or are looking to invest broadly in companies that meet the ESG criteria, we have a portfolio strategy for you.

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s web site or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please see important disclosure information here.

Is Pot Growing Environmentally Friendly?

Now that cannabis is legal in many states, it may be the case that pot users and investors think that cannabis is environmentally friendly, but it is not! Growing marijuana indoors takes an enormous amount of electricity, water, and chemicals. In other words, growing cannabis is energy-intensive and unfriendly to the environment.

Evan Mills writes in Slate, that a Colorado Study looked at the cannabis industry and found that this industry emits more carbon dioxide emissions than the coal industry. The environmental consequences of growing pot in national wildlands have been known for years. Toxic chemicals and fertilizers not only pollute the soil but waterways and wildlife. Now that cannabis is largely grown indoors, it indirectly contributes to greenhouse gas emissions by using massive amounts of electricity and water.

Pot is grown in large windowless warehouses because cannabis farmers can eliminate worry about weather and climate which gives them control of their crop. In order to grow cannabis indoors, factory farmers need large amounts of electricity, water, fertilizers, synthetic soils, and chemicals. All of this causes massive amounts of waste because little of this can be recycled. What may be good for the stock Scotts Miracle-Gro (SMG), for example, may be bad for the environment. Dumping of used soils contributes to groundwater pollution which isn’t any different from the aerospace manufacturers who dumped toxic chemicals on the ground that has leached into aquifers.

According to Evans, one large California cannabis factory uses enough electricity to power 90,000 homes. We estimate that the minimum water usage for this mega-factory would be 450,000 gallons of water per day which is more than Arrowhead Water pumps out of the San Bernardino Mountain springs each and every day.

Where are the regulators, the Environmental Protection Agency, Sierra Club, National Resource Defense Council, and others? With all the politicians being concerned about climate change, why are not these people asking questions?

Pot growing used to be the purview of backyard gardeners, college students growing cannabis in their dorm rooms or apartments, and cartels growing pot in national forests and South America. This is no longer the case with cannabis being the most profitable cash crop in America. Armies of MBAs are in charge of a growing industry. Pot growing has become very sophisticated and industrialized.

Growing cannabis indoors will require an upgrade to the nation’s grid system and power-producing capacities. Good luck with that when power producers and distributors will have to contend with a gigantic increase in power demand from the electrification of cars.

There is a solution where cannabis users can “have their pot and eat it too” Mills says, grow cannabis outdoors like farmers grow most other crops. As with industrial farming, there will be an overuse of fertilizers that will injure soils and pollute underground aquifers and waterways. Chemicals will be needed to eliminate weeds and insects that will be environmentally toxic.  We suppose cannabis growing in most cases is not environmentally friendly whether grown inside or out.

Sources:

Mills, E. (2021). To make cannabis green we need to grow it outdoors. Slate. Retrieved on March 16, 2021. https://slate.com/technology/2021/03/cannabis-environment-energy-indoor-outdoor-growth-climate-change.html

US Environmental Protection Agency (2021). Retrieved on March 16, 2021. https://www.epa.gov/ghgemissions/overview-greenhouse-gases

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s web site or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please see important disclosure information here.

Is Bitcoin an ESG Nightmare?

If some of the Environmental, Social, and Governance (ESG) rating agencies were to apply an ESG risk rating to Bitcoin, it would probably be a laggard and would be a nightmare to assign a risk rating to.

The energy-intensive process by which computers solve complex algorithmic problems to verify blockchain transactions is an undeniable “Environmental” offender, the E of ESG.1 The carbon footprint is massive – Bitcoin’s annual electricity consumption puts it at the edge of being the equivalent of a top 30 country. In one year, it uses around the same electricity as the entire population of Pakistan (c.217m people) and in the developed world more than Holland’s (c.17.5m people).2

Looking at the S (“Social”) of ESG, Bitcoin gets low marks here as well for human rights. For Bitcoin, decision-making is not subject to a centralized authority (i.e., no “censorship”); therefore, anyone can mine bitcoin. A large amount of new Bitcoin comes from Xinjiang, the region in northwest China where more than a million Uighur Muslims and other minorities have been imprisoned in concentration camps. Roughly 20% of the world’s Bitcoin mining takes place in China’s Xinjiang region because costs to mine Bitcoin are cheaper by using coal (another environmental concern).3

Now let us look at the G (“Governance”) of ESG and the fact that the anonymous nature of Bitcoin transactions has the potential to facilitate criminal activity.

There are many environmental, social, and governance reasons not to buy Bitcoin on top of the regulatory reasons and the rampant speculation occurring with some of the cryptocurrencies. It is important to note the technology behind various cryptocurrencies has merit. Imagine a world where transactions costs are near zero, the integrity of the transaction can be quickly verified, the transaction happens almost immediately, and the system is secure from an outside attack. This is the blockchain opportunity and it goes beyond finance. To learn more about blockchain, click here to watch our “Blockchain and Cryptocurrencies” webinar.

BFSG recently launched “Climate Change and Green” investment portfolios built on the fundamental investment principles that have guided our company’s value analysis and interject important environmental factors into our investment process. You will not find Bitcoin investments in our Green Portfolios, but we will invest in the securities of environmentally (green) responsible and sustainable global companies that make an environmental contribution. We are excited to be environmental investment stewards in the search for new green investments and if you are interested in learning more, please reach out to your BFSG financial adviser.

  1. Many governments around the world could eventually regulate cryptocurrency mining and force these miners to use renewable energy to some degree or promote carbon credits.
  2. Source: University of Cambridge, Deutsche Bank, “Chart of the Day: Bitcoin and ESG…”, February 19, 2021
  3. Source: Barron’s, “Bitcoin’s Worrying China Connection”, February 22, 2021

Disclosure: Investing involves risks, including the potential for loss of principal. There is no guarantee that any investment portfolio or strategy will be successful or meet its objectives. Portfolios discussed may not be suitable for all investors. Investments and strategies outlined in this presentation are not provided as personalized investment advice and should be discussed with an advisor prior to implementation.

BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s web site or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please see important disclosure information here.