This is an onsite, slightly edited republication of the complete G|O Briefing newsletter

Today in The Geneva Observer: the fundamental principles of gender equality and fairness were trampled last week at the UN Conference on Disarmament (CD). We have often reported on the ways in which liberal values and principles are under attack here in Geneva, so no surprise there; however, this latest tale is not only shocking but also raises some serious questions about the ability of the CD to get back to work—just as peace and security issues are firmly back on the global agenda.

After our coverage over the last few weeks, we won’t return to the now-published IPCC report but will nevertheless stay on the issue of climate change with an essay on ‘green sovereign funds’. Much of the global financial sector is mobilizing behind mid-century net-zero emissions targets, recognising the opportunities that will come with the transition to a low-carbon economy. The longer that sovereign wealth funds remain on the sidelines, the more they (and their countries) stand to lose, argue the essay’s authors.

Still on climate change, the stark warnings contained in the IPCC report put into a new light the perennial question of growth—or rather degrowth.  In the words of one climate scientist, “We no longer have a choice between cutting our carbon emissions or adapting to climate change. We have to do both, because the third alternative is suffering.” So, can we have prosperity without growth? ‘Economic anthropologist’ Jason Hickel has a fascinating take on the question in a new paper published in Nature Energy. It is freely accessible through his Twitter post, linked here. Hickel and his co-authors—some of whom do their research in Lausanne and Zurich—push the idea that high-income countries should develop post-growth policies to achieve strong social outcomes not predicated on growth. Such policies, says Hickel, would reduce excess production—thus lowering energy demand. Well worth a download and a read.

-PHM

Bad faith at the CD

Russia, Syria, Iran, Venezuela, and a few other countries have blocked the adoption of a resolution demanding to make the Rules of Procedures (RoP) of the Conference on Disarmament gender neutral— a proposal which was initially presented last year by Australia when it assumed the presidency of the CD.  

On July 28, Canadian Ambassador Leslie Norton, President of the Conference on Disarmament, circulated a draft resolution among the 65 members of the UN-affiliated body. The proposed text had a single corrective purpose: To reflect the equality of men and women by making the Conference’s Rules Procedure gender neutral. It reads:

The Conference on Disarmament decides to make the following linguistic/technical updates to its Rules of Procedure:
1.      The text of rules 10, 11, 13, 16 and 37 of the Conference’s Rules of Procedure that is crossed out is replaced by the bracketed text in bold, as noted below.
Rule 10: “If the head of the delegation which performs the function of President cannot be present, he [the head of the delegation] may be replaced by a member of his [the] delegation. If no member of the delegation holding the chair is able to perform the function of President, the delegation next in order of rotation shall temporarily assume this function.”

Rules 11,13,16 and 37 were similarly modified.

“My country is convinced that women’s empowerment and gender equality have a direct impact on maintaining international peace and security.” –Peruvian ambassador Silvia Alfaro

The argument in favour of the adjustment was simple: referring to “he”, “him” and “his” in the Conference’s rules is not inclusive of women, and thus does not reflect the make-up of the body itself. The outdated language could be changed with a few fixes, without any bearing on the substantive work of the Conference. “Such a technical update should be automatic, like correcting a spelling mistake,” said Tatiana Valovaya, the Director-General of the United Nations Office in Geneva (UNOG).

“Every action counts, when it comes to breaking down barriers to gender equality, and my country is convinced that women’s empowerment and gender equality have a direct impact on maintaining international peace and security,” argued the Peruvian ambassador Silvia Alfaro, in her opening statement.

But on August 5, when the Canadian diplomat presented her government’s resolution to the CD, it may in fact have been dead-on arrival as a group of countries had already decided to oppose it, and the rule of consensus that prevails at the CD meant it couldn’t be immediately revived.

Iran, Syria, Venezuela and Russia—the countries opposing the change—carefully avoided criticizing the principle of gender equality. They chose instead to contest the resolution based on technicalities, objecting to the fact that the resolution was in English, and claiming that there was no urgency to the change, which was distracting the CD from its substantive work.

By the end of the discussion, fairness and equality—the very principles embodied in the draft resolution—were defeated by plain bad faith and a slew of specious arguments. For a number of female members of the CD, insult was added to injury when the Russian delegate claimed that there was no gender inequality at the Conference.

Although her words are carefully chosen to suit a diplomatic exchange, you can feel the outrage from Chilean representative Pamela Moraga when she confronts Andrey Belosouv (the Russian Deputy Representative to the CD), calling him by his first name: “For the record, I also need to state, as my Peruvian colleague and my Mexican colleagues have stated, I respectfully disagree with the Russian delegation’s view that there is no problem with gender in the CD. Actions, Andrey, actions speak louder than words. When the Chilean author, Isabel Allende, lost her daughter, she stated, ‘this bends me, but it does not break me.’ This does not break us, Chair.”

The same anger was equally perceptible when the Mexican ambassador stated that her Russian colleague would “not be happy if she would refer (to him) as ‘she’. That's the issue for women. We want to be recognized—if there really is a political will to recognize gender equality.”

“This is one of the most disappointing things that I have witnessed in the CD during my seven years here in Geneva,” Robert Wood, the US Ambassador to the CD, told his colleagues. It had been, he added “a straightforward opportunity for this body to do the right thing, and yet we failed.”

The Ambassador’s words reflect a significant worry among supporters of the resolution: if members are unable to agree on an issue which, although highly symbolic, has no consequences on the work of the CD , how will they be able to negotiate substantive agreements?

The Conference on Disarmament has been unable to agree on a program of work this year. Its last significant negotiation happened in 1996. Questions such as the enlargement of the CD, included in the Rules of Procedures, have not been taken up for now more than two decades. Criteria for membership, or for the rotating presidency, have also not been discussed—despite efforts by several countries.

“It is hard not to notice that the countries that have objected to making the language of the Rules of Procedures gender neutral are the same countries that have been putting obstacles in the way of reaching agreement on a program of work. This is a targeted effort to stall the CD,” Wood told The G|O. “This is dangerous, because what is at stake is the future of a body that was designed to reach agreements on controlling armaments. Although we haven't negotiated anything in over 25 years, there is a lot at stake. From the centrality of nuclear disarmament, to peace and security around the world, we cannot progress if this body can't show the way forward.”

-PHM

Elsewhere in the Ecosystem

The Afghan crisis is back on the radar of humanitarian organisations in Geneva, with a thick and worrisome signature. They not only raise the alarm about the funding situation in the country, but also warn that there is growing evidence of severe human rights violations—which may amount to war crimes and crimes against humanity, according to Michelle Bachelet, the UN High Commissioner for Human Rights.

In Afghanistan, since 9 July and in four cities alone—Lashkar Gah, Kandahar, Herat and Kunduz—at least 183 civilians have been killed and 1,181 injured, including children. Even before the latest wave of violence by the Taliban, the UN had documented a steep increase in civilian casualties. Unless all parties return to the negotiating table and reach a peaceful settlement, the UN argues that the already “atrocious situation” for so many Afghans will become much worse. Bachelet also urged all states to use their influence—bilaterally and multilaterally—to de-escalate the situation. Since the start of the Taliban offensive in May, at least 241,000 people have been displaced.

The High Commissioner also expressed particular concern about early indications that the Taliban are imposing severe restrictions on human rights in the areas under their control—particularly targeting women. There are already reports of women having been flogged and beaten in public because they breached prescribed rules.

New access to Tigray

UNHCR has regained access to the Mai Aini and Adi Harush camps for Eritrean refugees in Ethiopia’s Tigray region. The organisation had been blocked from the area since 13 July, due to violent clashes, but as of August 5, UNHCR has restarted the delivery of aid for the 23,000 refugees across both camps. 12 trucks carrying emergency aid have also reached Merkel, the region’s capital.

However, the agency is concerned about fresh displacement from fighting in Ethiopia’s Amhara and Afar regions. According to estimates from the UN Office for Coordination of Humanitarian Affairs (OCHA), 100,000 people in Amhara and 70,000 in Afar have been internally displaced.

In total, UNHCR is appealing for US$164.5 million to assist 96,000 Eritrean refugees, 650,000 internally displaced people in Ethiopia’s Tigray region, and up to 120,000 Ethiopian refugees in Sudan.

By Jamil Chade

Where Are the Green Sovereign Funds?

By Håvard Halland and Günther Thallinger*

Institutional investors are increasingly embracing the effort to achieve net-zero greenhouse-gas (GHG) emissions by 2050. Some are already implementing portfolio measures and incorporating climate factors into their decision-making. The United Nations-convened Net-Zero Asset Owner Alliance (which one of us chairs) has already welcomed 46 members, comprising pension funds and insurance companies representing some $6.7 trillion in assets under management (AUM).

The steps taken this decade will be decisive as regards hitting the mid-century target. Of the Alliance’s members, 23 have publicly issued GHG-reduction targets for 2025, which means they are committed to acting immediately. The remaining five members that are required to set targets this year will declare similar interim goals soon. Net-zero initiatives are also being established in the investment-management and banking industries, representing $43 trillion and $37 trillion in AUM, respectively. And yet, sovereign wealth funds (SWFs) – representing AUM totaling around $10 trillion – are conspicuously absent, even though some are owned by governments that have adopted ambitious climate objectives.

Under existing international agreements, GHG emissions are measured at the country level, which understates the potential climate impact of countries with large foreign-asset holdings. For example, the Norwegian SWF’s total asset holdings are three times the size of Norway’s economy, and its equity-portfolio carbon emissions are around twice the country’s own total emissions.

Norway is not alone. A recent report by the International Forum of Sovereign Wealth Funds (IFSWF) shows that SWFs around the world are lagging behind. About three-quarters report having less than 10% of their holdings in climate-related strategies, while only 14% have made divestment decisions related to climate or environmental targets. While 24% of SWFs consider climate action part of a broader ESG (environmental, social, and governance) framework, only 12% have an explicit climate-change policy.

To be sure, IFSWF’s own Generally Accepted Principles and Practices (the “Santiago Principles”) do not specify sustainability requirements for SWFs. But governments of countries that have SWFs should view the UN Climate Change Conference in Glasgow (COP26) in November as an opportunity to commit fully to the net-zero program.

There are several reasons why they should do this. For starters, 2050 net-zero targets are becoming a mainstream expectation for all large institutional investors. If a government chooses not to commit its SWF to this goal, it will be free riding on the growing share of the private financial sector that is already going green – a paradox of climate finance if there ever was one.

Moreover, it makes little sense for governments seeking to be consistent in their climate commitments to separate SWF portfolio emissions from overall climate objectives. The domestic focus of international climate agreements should not be interpreted as a free pass for emissions associated with foreign investments. Instead, governments should be using their SWFs’ financial weight to drive climate action internationally.

Last but not least, the transition to a low-carbon economy represents the biggest investment opportunity in decades. Shifting from “brown” to “green” will require changes on the scale of another industrial revolution; those who create new markets or enter them early stand to reap massive returns.

As one of the few SWFs with an explicit emissions-reduction objective, the New Zealand Superannuation Fund has already begun to seize these new opportunities. Between 2017 and 2020, the fund’s low-carbon benchmark portfolio, which comprises 40% of its total assets, generated returns that were 0.6% higher than its standard benchmark portfolio. By contrast, Norway’s SWF missed out on $126 billion in potential returns during the same period, because it invested in oil and gas instead of green stocks.

Because many countries with SWFs have historically been heavily dependent on their oil and gas sector, the transition away from fossil fuels exposes them to larger economic risks. But governments can mitigate these risks by aligning their SWFs with climate targets. A total portfolio approach would enable these governments to start delinking domestic economic growth from SWF returns, thereby enhancing the robustness of the economy as a whole.

For SWFs, as for other institutional investors, staying on the sidelines of the global climate-mitigation effort is no longer an option. But nor is it enough to focus solely on climate-related portfolio risk while ignoring a fund’s broader climate impact. Were SWFs to get serious and join the Net-Zero Asset Owner Alliance, they would be required to set stronger emissions targets every five years, reporting annually (alongside the usual financial disclosures) on their progress toward meeting them. They would also be expected not only to invest in green assets but also – and more importantly – to develop new sustainable assets themselves.

Countries like France, Ireland, New Zealand, Norway, Singapore, and the United Arab Emirates are well placed to lead a global SWF movement toward net-zero commitments at COP26. If they do, other funds with large investment teams and sophisticated operations may soon follow, and those with fewer resources would, one hopes, be close behind them.

Most SWFs were established as savings vehicles for future generations. It stands to reason that these funds should contribute to the conservation of the climate on which those generations will depend.

The views expressed in this article are the authors’ own and do not necessarily represent those of the OECD.

Håvard Halland is Senior Economist at the OECD Development Centre. Günther Thallinger, a member of the Board of Management of Allianz SE, is Chair of the UN-convened Net-Zero Asset Owner Alliance.

Copyright: Project Syndicate, 2021.

Today's Briefing: Philippe Mottaz - Jamil Chade

Editorial assistant: Ciara O'Donoghue

Guest essay: Håvard Halland - Günthr Tallinger

Edited by: Dan Wheeler