Is the whole notion of ESG disclosure a massive distraction? In 2021, Tariq Fancy of Blackrock called it a distraction for climate action. And I tend to agree because it tries to pass on the responsibility of climate action into the hands of the market, that had continually proved incapable of generating endogenous climate action. Sure, you need the market to scale solutions, and drive the expansion of some of the good things that will benefit the climate. But to think that the market can drive change just purely from the realisation of climate change as a problem is naive.
By leaving the type of climate action and the labelling of what counts as green to the market will simply generate greater confusion and inaction as we have seen from the proliferation of funds that tout sustainability or impact, or both and often still trying to pair that with financial returns, etc. The extra cost that goes into reporting, emissions accounting and massive resources around disclosure standards and all simply drives activities for the big consultancies without diverting energies towards the direction of climate action.
The issue is that greenwashing is real and pretty easy. And that can take the form of superficial disclosures that tosses buzzwords around. Yet there are corporates taking genuine action drowning in this sea of sustainability marketing and PR nonsense, being accused of greenwashing when they are trying to make a difference. If it was all going to boil down to rules, regulations and laws, then there won’t be ESG funds and non-ESG funds or government having to regulate disclosures. There won’t be accusations of greenwashing because you are either green or just illegal/non-compliant.
Regulation is of course a complex topic for another day but it has to be worked on. Regulating disclosure is unlikely to be enough.
The government tends to be an easy target for most of the problems, or the lack of solution towards them. In most cases, the lack of technical solutions tend not to be the barrier towards solving the problems. It is a matter of adoption. And people look towards the government to drive the uptake of solutions. The struggle today, in the market economy where there’s a multitude of technical solutions backed by various different economic interest, there’s some kind of gridlock towards having governments select solutions.
Historically, the popular beliefs, ideas and thoughts drive the directions of democratically elected government. Influence from businesses probably will contribute to some of that. But the options are limited (automobiles or horse carriages, internal combustion engines or electric engines, AC or DC transmission, etc.) and there are certain dimensions by which governments can justify their choices and move forward.
Today, it is less clear. Should we electrify homes completely or allow them to continue using gas, albeit having to encourage the development of renewable gases? Should the government be driving the choice of technologies used in homes or industries by enabling or making difficult the development of more biomethane for grid-injection? Or should they be encouraging full electrification not just of homes but also industries, and even heavy transport, redeveloping infrastructure to be able to deliver lots of electricity, enabling battery swapping or ultra-fast charging along highways?
What are the dimensions that the government should be optimising along, should they be taking positions to propagate certain solutions or standards? Are they in the position to make those choices? Yet some of these innovations and technological adoption can only move forward with enabling policies. The issue is that being in a standstill and not enacting any policy is in itself a choice for status quo, for the carbon-intense way of life, and dooming our system. Yet making a choice can mean excluding certain options or causing certain options to be more or less expensive than they otherwise would be, hence favouring one over another.
Taking policy positions and ultimately making some kind of technological choice implicitly is inevitable. So it is just a matter of what are the priorities.
We might not realise it but governments have a huge role in creating markets. This is because markets do not spontaneously emerge out of nowhere especially in highly developed economies. One of the reasons is that markets actually requires structures, institutions and frameworks such as rules and regulation can encourage players to step forward more boldly and grow the market.
Today, in Australia, despite the multi-dimensional benefits that bioenergy brings, and synergises with the traditional economy, there’s still little recognition of the low-carbon identity of bioenergy. And it is a shame that methane produced from biological processes are still seen as not too different from natural gas that is extracted from the ground. There is no forward direction by the government to stake the space and define the standards for biogas production, upgrading into biomethane and regulations around treatment and handling of the digestate, which itself is a by-product of the process that can be made useful.
There is perhaps a clear path to create a market not just through regulatory clarity but also enforcing demand. Market for audit, market for inspections, even market for many public services are created by regulations. Sure, there’s a need and the market contributes positively to society and so regulations support that. Why can’t we do the same with clean energy? One that displaces directly the fossil fuels in our system?
There’s going to be a new kind of entrepreneurship; not necessarily one that is building businesses with an established revenue stream or for a current market need, but one that bets on the needs of a future that the world wants to be creating. And the upcoming green race might unleash this new breed of entrepreneur more strongly than before. In the post-pandemic era where people might have got sick of government stimulus allowing billions of capital to slosh around the system, risking inflation and simply making the richer rich, fiscal policy might be returning to the center-stage as the new means of keeping the public voting base satisfied.
The green race is going to drive new winners in the economy as entrepreneurs who have positioned themselves to make the critical investments needed for the economy. Especially the ones that going to create the very jobs that politicians plan to trumpet about. Being able to think ahead and consider the kinds of businesses desired both by the public sector in an economy that is highly pro-market will be rewarded. The risk is that the public sector decides to take on the direct investments themselves rather than to ‘incentivise’ the businesses to do so. This is why the pro-market orientation of the government is important.
For the markets where the government have the tendency to perform direct intervention or deem infrastructure investments way too strategic to be left to private sector, the green race may take those economy in a different direction. They may choose to create new state-owned and managed entities to make new direct investments or to use the existing ones. And the green jobs will be created within state-linked enterprises. Civil servants who are savvy in these areas will tend to gain within such systems.
Either way, there are going to be new ways smart people will be gaming the system.
The beauty of the market system emerges when there’s competition along the right dimensions just when we all need them. But competition doesn’t always require a market economy – there’s always limited resources, time and other constraints that requires us to somehow compete. There’s also reputation, attention of people and recognition that drives us to compete. In the 20th century, the space race during the cold war led to phenomenal technical and technological advances which powered the growth over the 21st century.
There was an alignment of political, and public interest. The economic interest was not entirely foreseen and only realised much later. But it seemed that entire economies of Europe, US and Soviet Union were engaged in this mission. It seemed like a conflict and perhaps competition of egos but eventually worked for the good of mankind.
Today we need to shift this mission for space to a mission for mankind on our planet. Developing a green race probably takes a good alignment of the public and political interest, as well as some kind of competitive tensions. We are beginning to observe this with first sound of the trumpet from US with its IRA focus on Clean Energy and climate transition last year; and then Canada followed with its own programme to fund indigenous clean energy projects. Australia’s announcement last week with a highly targeted programme focusing on hydrogen reflects the same sort of tension around the competition to attract the competent hydrogen players to develop required projects in their backyard.
As an energy transition consultant, I welcome this. As much as we might think the competition can result in duplicative efforts and inefficiency, it is what we need to align the incentives in the market with the interest of the overall society. Moreover, harnessing the public interest and pressure upon this topic through directing the workforce and human capital towards the low-carbon economy is much needed. The green race should hopefully create the necessary ecosystem we need to drive further changes and ensure the climate transition.
Each leap forward by technology is accompanied by fears around humans becoming or being mediocre. And most fears are basically exaggerated versions of reality as it turns out. So indeed, mechanisation has reduced the need for physical human labour and it has made majority of mankind physically less able than our forefathers but we’ve also been healthier and lived longer lives.
With the rise of AI, there’s fear of depending on it and concerns in schools about teachers losing their jobs or students outsourcing their work to ChatGPT. Lousy journalists who had been churning out mediocre pieces of work can be now replaced by AI, customer service representatives that don’t know their stuff can be replaced by chatbots and so on. The problem isn’t really about chatbots or AIs, or quality of humans. It is the issue around industrialization specifying standards, creating processes and expecting humans to fit into that.
We should begin to see all of the roles we humans can take as something relatively temporarily. That does not mean we shouldn’t invest in our craft and up our skills but that does put into question where is the boundary between human and machine in the work that we do. Measured in a single dimension, machines and technology can always be optimised to eventually deliver better performance than humans. The issue isn’t human’s mediocrity because there are mediocre workers and they’ve long been easily replaceable. Seth Godin recently talked about the matter on his podcast through two episodes (here and here).
The fact that AI frees us up from having to do the basic, minimum kind of work should present an opportunity for all of us. It might threaten some of us, but only if we allow it to.
So Singapore’s target for net-zero is 2050, with the public sector aiming to reach the target in 2045. And with coordination being touted as one of the core strengths of the Singapore government, we have a Chief sustainability within the government to manage that. This role in businesses is still very ambiguous and it is not clear whether the person is managing the process of decarbonisation for the the company or to manage the sustainability offering of the firm.
Likewise, it is not entirely clear whether the Chief sustainability in the government of a country should be responsible only for the public sector emissions or taking charge of the reduction of emissions across the entire country. Frankly, the public sector emissions are already very significant. Part of the challenge is that almost all of the wastewater treatment and water supply plants are owned and operated by the government; at the same time, the government also own and operate incineration plants. This is probably why in the business times article, it was stated that Ministry of Sustainability & Environment is itself one of the large emitter.
But Singapore’s approach to decarbonisation is unlikely to be about the government just dealing with its own emissions and then trying to create structures to drive decarbonisation of the private sector. The fact that the Chief sustainability starts talking about costs, value and trade-offs is already a clear sign that the government is probably thinking about abatement cost at a system level. And it is true that the government in Singapore is uniquely positioned to evaluate this. We might have a shot at being able to collectively determine what are the lowest hanging fruit across the society to reduce emissions and then collective work through the curve of diminishing marginal returns. In other words, we can look at the avenues of abatement that incur the lowest costs while making the largest reductions first.
This means that while the government might be able to try to reduce energy use in the desalination plants or secure green electricity, they might not because there may be other industries that can reduce the emissions at lower costs. This sort of system level optimisation may not be possible in bigger countries; but for a small island state where our renewable resources are too scarce, that might be the only way.
In 1819, when Sir Stamford Raffles came to strike a deal that made Singapore a British colony, the population of Singapore is approximately 150. 2 years later, in 1821, the population rose to 5000 mostly as a result of the establishment of the port, providing ready access to population from other centers.
By 1860, however, the resident population ballooned to around 80,800 comprising mainly of “temporary” immigrants coming from India, China as well as from the surrounding islands. In the 1870s, Singapore became the main hub for sorting and export of rubber, a major commodity for global economic development.
By the close of 19th Century, Singapore was a thriving hub in the region. The economy grew eightfold between 1873 and 1913. Before there was the Singapore we know today, the port city was already a major trading hub. This wasn’t purely luck nor a matter of domestic economic policy. So what happened through these years?
Reducing Piracy
Just 5 years after the establishment of Singapore as a free port under British rule, in 1824, the English and the Dutch brokered a deal to exchange Bencoolen (or Bengkulu in Sumatra) for Malacca. This was particularly important; the other port that was controlled by the British in the region was Penang, which the English established since 1790; the location was not that popular since ships from the east will still have to pass through the Straits of Malacca before reaching Penang.
With Penang and Singapore under the control of the British, the rivalry between the English and the Dutch in the region meant that Dutch control of the Straits of Malacca through possession of Malacca was a significant bottleneck. The Anglo-Dutch Treaty of 1824 resolved the rivalry (somewhat) by allocating spheres of influence, opening up the entire chain of territories — Penang, Malacca and Singapore to British control and thus greater incentive for the Royal Navy to maintain the safety of the trading ships passing through the Straits of Malacca.
The Dutch Navy was implicitly given the same responsibility on the side of the straits closer to Indonesia. In fact, the Dutch greatly expanded their presence in the straits. Before that, piracy was extremely rampant along that straits and the numerous islands around provided safe bays for pirate ships. The informal security coordination in these waters gave way to higher flow of trading ships thus facilitating the boom of the port of Singapore.
Injection of Human Capital
By 1825, the population of Singapore went past the 10,000 mark. And in 1826, the British East India Company officially took on Singapore as a colony of the British Empire after John Crawfurd signed a second treaty with the Sultan of Johor and the Temenggong, which extended British control of Singapore over to the entire island instead of just the port.
The formation of the Straits Settlement consisting of Penang, Malacca and Singapore happened in the same year with Penang designated as the capital. In 1830, the capital was shifted to Singapore, further entrenching the important institutions of British governance in Singapore.
The decisions made by British to build up and enhance the value of Singapore and the injection of top civil servants and managerial talents into Singapore due to its designation as capital of the Straits Settlements (and subsequent establishment of the Straits Settlements as a crown colony in 1867) played an extremely important role in shaping the economic, political and administrative environment which proved extremely favourable to Singapore.
Why is this important to us as an individual?
At an individual level, this holds 2 key lessons for us in terms of thinking about jobs and careers:
You want to be very selective in the environment that you subject yourself to if you have enough choice and control. Put yourself in a safe environment where you surround yourself with a friendly support network.
You want to build up your capabilities and be proactive in growing your knowledge and skills relevant to the network you have built up.
Where you find yourself in a hostile or personally unfavourable environment, have no qualms about withdrawing yourself from it. There is no point in spending time and efforts fending off criticisms and attacks with limited resources you have. Better to find a new environment and context where you can be nurtured and grow. Success often begets success as the initial value you develop attracts others to contribute to your development. Just make sure you don’t get so addicted to it that you begin to fear failure.
This is part of a series of republished articles from my Medium page because I am worried about the platform ceasing to be. A previous version of this article was published in here a while back focusing only on the economic history aspects.
The energy transition and decentralisation of energy had quietly started shifting the capital markets since close to a decade ago. While the traditional energy players continue to compare the cost of green energy against the cost of their own fossil fuel based energy, they found no reason to diversify their business. Even in face of some subsidy, or some Feed-in-Tariffs, they were reluctant to invest.
There was no scale, and they thought they were going to face more competition and erosion of any green premiums they could secure. But then the capital holders started taking notice. The projects were simple enough to invest into. Solar farms had minimal requirements from an operational perspective, and represented to some degree a pure capital good where almost all the cost are paid upfront for a stream of revenue in long term.
From a risk perspective, it was safe. And so long-term funds which needed safe investments at moderate yields started piling in. The utility scale projects expanded, driving down the cost of equipment, and fostered more innovation there. Here is a case where, the technical simplicity of the operations enabled investors to bypass the typical operating businesses to get into the underlying projects themselves. All of a sudden, it is not about looking for the premium anymore. Because you’re alright with scale.
Sometimes, growing and developing a market is about finding customers who are willing to pay a higher price; but other times, it is about finding investors who are willing to accept a lower expected return for other attributes.
So everyone in Singapore were talking about Shou, the CEO of Tiktok who went to face the interrogation by the congress. He is a Singaporean and we were all pretty proud of his performance.
That clearly wasn’t easy; he was being talked over, treated rudely; most of the people interrogating him had speeches of their own where they needed him to fill in the blanks rather than genuinely expecting answers. I thought Adrian Tan’s observation that Shou was often the calmest person in the room of people who were interrogating him was interesting.
While the hearing remains inconclusive, there was little mistake that the US is entering yet another cycle of active state intervention into business. It is strange that issues being put across the table confused data privacy issues, responsibilities of a tech company management, geopolitics and business ownership.
Our institutions today are highly complex and sophisticated. Even the concept of ownership in a business is made so complicated by unbundling of the various rights that are traditionally attributed to owners, then dishing them out to various parties.
