These two currencies face the greatest risk from climate change

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By David Callaway, Callaway Climate Insights

On the worst week of the year for global markets, and as climate impacts baked Europe and flooded Yellowstone Park, a major bank took a shot at predicting just how much financial markets could be hit by global warming.

It’s tempting to dismiss Barclays’ report on foreign exchange markets as too much gloom and doom, even for this week, but it is helpful in that it attempts to show which forex markets might swing in the event of major climate shocks such as rising seas.

The Japanese yen and the Chinese yuan are most susceptible, with the Chinese currency vulnerable to losing up to half its value over the next 50 years as higher waters, dangerous pollution and crop failures threaten the world’s second largest economy.

By contrast, the U.S. dollar looks like it could do OK, and the euro and Australian dollar might even rise over time as their economies are more spread out from major population centers and so better able to adapt.

While the report admits it’s looking at worst-case scenarios, it’s helpful to begin to put real numbers and specific assets into the calculations as it will focus investors and governments on realistic threats and not vague dangers. As risk disclosures improve over time, the wrenching, systemic change coming to the world’s economies from global warming will become more apparent.

More insights below . . . .

Why the ESG transition will be hugely inflationary

. . . . Central bankers and economists may disagree on how long the current bout of global inflation will last, but in the face of the needed energy transition to renewables, it may be a moot point, writes Mark Hulbert. Shifting the world’s power demands from oil and gas to renewable energies such as wind and solar will be hugely inflationary, Hulbert finds, from gains in metals and minerals to even higher prices for oil and gas themselves . . . .

Read the full column

EU notebook: Campaign to limit nuclear, natural gas wins reprieve

. . . . Climate activists seeking to prevent the European Union from including nuclear energy and natural gas from its sustainable taxonomy won a reprieve this week when the the idea failed to pass a key committee, writes Alisha Houlihan from Dublin. The idea, which still faces a full plenary vote later this summer, has been attacked for diluting the meaning of sustainable energy. . . .

Read the full EU notebook

Thursday’s subscriber insights: In a brighter future, renewable energy costs will drop

. . . . Growth of U.S. wind and solar is not so good at the moment, but that won’t last too long, says a new report, adding that the long-term results — both in the past and future — predict costs will continue to drop. Read more here. . . .

. . . . With the world’s energy supply in crisis, nations are increasingly looking to nuclear as a steady supply of power, with some calling it green energy. Examples come from Romania, South Korea and elsewhere. Read more. . . .

. . . . Turns out tomatoes may be the next victim of global warming, particularly the ones used to make ketchup and pasta sauce. Read more here.

. . . . Creepy crawlies to the rescue: A team of scientists from the University of Queensland in Australia discovered that Zophobas morio, or superworms, can live on a diet of plastic waste thanks to enzymes in their gut bacteria that convert it into energy. Read more here. . . .

Editor’s picks: Rules proposed for national EV charging network

Biden administration proposes rules for national EV charging network

The U.S. The Department of Transportation has proposed minimum standards for a nationally funded EV charging network to ensure a consistent customer experience and promote EV adoption. The DOT said in a news release, “These minimum standards will help ensure our national EV charging network is user-friendly, reliable, and accessible to all Americans, and interoperable between different charging companies, with similar payment systems, pricing information, charging speeds, and more. The proposed rule would establish the groundwork for states to build federally-funded charging station projects across a national EV charging network.” The proposed rule is expected to be published in the Federal Register this week. A signed copy of the document submitted to the Federal Register for publication is available on FHWA’s website. A final rule may be published after FHWA has had the opportunity to review the comments submitted.

Gates on avoiding climate disaster

Bill Gates said he remains optimistic about the ability for global social action to address climate issues. TechCrunch’s Darrell Etherington spoke with Gates recently as part of TechCrunch Sessions: Climate 2022. Etherington writes that Gates pointed to “countries outside the U.S. who stood as exemplars of how to minimize the health impacts of Covid, despite in every case having fewer resources to do so. He also cited the ample progress we’ve made since 2015, the end of the last green tech boom, in particular in terms of an ‘IQ shift’ that has seen talent and skill move toward developing real solutions in the lab, rather than going into things like maximizing returns in the banking sector, for instance.” Etherington also quoted Gates as saying economic conditions are currently “changing probably as rapidly as I’ve ever seen in my lifetime.” Watch the full conversation.

Green investment: Finance or climate driven?

There is limited research on the determinants of firms’ green investment strategies in developing regions, despite their importance to meet global climate change targets. Understanding how changes in firm climate investment affect environmental performance is essential for policy makers and firms alike, according to the authors of Green Investment by Firms: Finance or Climate Driven? From the abstract: Based on unique data from the joint European Bank for Reconstruction and Development – European Investment Bank – World Bank Group Enterprise Surveys, this paper empirically examines the role of access to finance and green management practices in firms’ green investment strategies. Based on logistic regressions, the econometric analysis finds a positive influence of green management practices on the number of mitigation measures implemented. By contrast, firms that are financially constrained are less likely to pursue many mitigation measures. Finally, the results do not show significant differences in the impact of financial constraints on the type of green investment, but indicate that better green management practices lead to a higher likelihood of investing in both capital- and non-capital-intensive green measures. Authors: Fotios Kalantzis, European Union – European Investment Bank; Helena Schweiger, European Bank for Reconstruction and Development; European Bank for Reconstruction and Development Office of the Chief Economist; Sofia Dominguez, independent.

Words to live by . . . .

“If your house is on fire, you don’t comfort yourself with the thought that houses have been catching fire for thousands of years. You don’t sit idly back and think, ‘Oh well, that is the way of nature.’ You get going, immediately. And you don’t spring into action because of an idealistic notion that houses deserve to be saved. You do it because if you don’t, you won’t have a place to live.” — Bill Nye, scientist and engineer.

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