07/01/2022

(NYT) Chile Writes Its Constitution, Confronting Climate Change Head On

New York TimesSomini Sengupta | 



Evaporation ponds at a lithium plant in Chile’s Atacama Desert. Questions of mineral wealth, global warming and water are at the heart of a rewrite of the nation’s defining document.

SALAR DE ATACAMA, Chile — Rarely does a country get a chance to lay out its ideals as a nation and write a new constitution for itself. Almost never does the climate and ecological crisis play a central role.

That is, until now, in Chile, where a national reinvention is underway. After months of protests over social and environmental grievances, 155 Chileans have been elected to write a new constitution amid what they have declared a “climate and ecological emergency.”

Their work will not only shape how this country of 19 million is governed. It will also determine the future of a soft, lustrous metal, lithium, lurking in the salt waters beneath this vast ethereal desert beside the Andes Mountains.

Lithium is an essential component of batteries. And as the global economy seeks alternatives to fossil fuels to slow down climate change, lithium demand — and prices — are soaring.

Mining companies in Chile, the world’s second-largest lithium producer after Australia, are keen to increase production, as are politicians who see mining as crucial to national prosperity. They face mounting opposition, though, from Chileans who argue that the country’s very economic model, based on extraction of natural resources, has exacted too high an environmental cost and failed to spread the benefits to all citizens, including its Indigenous people.

And so, it falls to the Constitutional Convention to decide what kind of country Chile wants to be. Convention members will decide many things, including: How should mining be regulated, and what voice should local communities have over mining? Should Chile retain a presidential system? Should nature have rights? How about future generations?

Around the world, nations face similar dilemmas — in the forests of central Africa, in Native American territories in the United States — as they try to tackle the climate crisis without repeating past mistakes. For Chile, the issue now stands to shape the national charter. “We have to assume that human activity causes damage, so how much damage do we want to cause?” said Cristina Dorador Ortiz, a microbiologist who studies the salt flats and is in the Constitutional Convention. “What is enough damage to live well?”

Then there’s water. Amid a crippling drought supercharged by climate change, the Convention will decide who owns Chile’s water. It will also weigh something more basic: What exactly is water?

‘Sacrifice Zones’

President-elect Gabriel Boric, center left, met with members of Chile’s Constitutional Convention this month.

Chile’s current constitution was written in 1980, by people handpicked by its then military ruler, Augusto Pinochet. It opened the country to mining investments and allowed water rights to be bought and sold.

Chile prospered by exploiting its natural riches: copper and coal, salmon and avocados. But even as it became one of Latin America’s richest nations, frustrations mounted over inequality. Mineral-rich areas became known as “sacrifice zones” of environmental degradation. Rivers began drying up.

Anger boiled over into huge protests starting in 2019. A national referendum followed, electing a diverse panel to rewrite the constitution.

On Dec. 19 came another turning point. Voters elected Gabriel Boric, a 35-year-old former student activist, as president. He had campaigned to expand the social safety net, increase mining royalties and taxes, and create a national lithium company.

The morning after his victory, the stock price of the country’s biggest lithium producer, Sociedad Química y Minera de Chile, or SQM, fell 15 percent.

The Father of Volcanoes

An SQM lithium processing plant.

One fifth of the world’s lithium is produced by SQM, most of it in the Atacama Desert in northern Chile in the shadow of ancient volcanoes, including the oldest and still-active one, Lascar. The Lickanantay, the area’s Indigenous people, call Lascar the father of all volcanoes.

From above, the mine looks as though someone has spread a glistening blue and green quilt in the middle of this pale desert.

The riches lie in the brine underground. Day and night, SQM pumps out the brine, along with freshwater from five wells. Pipes carry brine to a series of ponds.

Then, the sun goes to work.

The Atacama has the highest solar radiation levels on Earth. Water evaporates astonishingly fast, leaving mineral deposits behind. Magnesium comes out of the ponds. Also potassium. Lithium remains in a viscous yellow green pool, which SQM converts into powdery white lithium carbonate for battery makers abroad.

SQM was a state-owned maker of fertilizer chemicals until Mr. Pinochet turned it over to his then son-in-law, Julio Ponce Lerou, in 1983. More recently, it has been fined by Chile’s stock market regulator and by the U.S. Securities and Exchange Commission over violations of the Foreign Corrupt Practices Act. Mr. Ponce, no longer chairman, retains 30 percent ownership.




(AFR) Private Credit: Catalysts For Climate Impact

Australian Financial Review - Adriana Becera Cid

Private credit is positioned for investment opportunities in the transition to a resilient, net zero economy.

Author

Adriana Becera Cid is a sustainability analyst in Lombard Odier’s Sustainability Investment Research, Strategy and Stewardship team, and a member of Lombard Odier Investment Management’s  Sustainable Private Credit Investment team.
“The window is still open, scientifically, to act,” according to Professor Johan Rockström, architect of the nine planetary boundaries – environmental thresholds for humanity recently popularised by the Netflix documentary, Breaking Boundaries.

During the Zero-Hour Sessions, an event convened by Lombard Odier during the COP26 climate summit, Rockström stressed that our planet – “a complex, adaptive, self-regulating biophysical system” – has tipping points which, if triggered, cause “self-enforced drift in the wrong direction”.

While the stability of our planet, and the economic activity it supports, depends on humanity keeping within these science-based thresholds and avoiding the “no-go zones” beyond them, we have already broken through four limits:
  • toxic waste
  • air pollution
  • freshwater overuse and
  • agrochemical pollution
and are on course for transgressing a critical fifth boundary:
  • keeping global warming within 1.5 degrees above pre-industrial levels.
According to the IEA, COP26 commitments reduced the forecast global temperature rise from 2.7  degrees to 1.8 degrees.

 While further policy impetus is essential in directing real decarbonisation throughout the economy, private sector resources must be marshalled to realise the required emissions reductions.

The financing gap to put the world on a path to net zero is estimated to be $US32 trillion ($44 trillion) in the next decade.

New arenas of risk and opportunity

As illustrated below, economy-wide decarbonisation presents new variables to consider in evaluating risk-adjusted returns as transitional, physical and liability risks increasingly factor into corporate profitability and valuations:
  • Transitional risk includes shifts in demand among climate-aware consumers, companies’ ability to reduce emissions and the impact of higher carbon costs and regulation.
  • Physical risk includes the damage caused by more frequent extreme weather events and the associated degradation of agricultural yields and less-productive labour forces.
  • Liability risk includes historical responsibility for climate change among companies and sovereigns, as well as mitigation and adaptation costs.
Extreme weather is a form of physical climate risk. US President Joe Biden and Kentucky Governor Andy Beshear talking to people as they survey storm damage from tornadoes and extreme weather in Mayfield, Kentucky, in December 2021.  AP
Forward-looking investors may identify public and private businesses that are mitigating climate risk and acting on the opportunities generated by the transition.

Lombard Odier believes there are significant opportunities available to advance the transition to net zero (“NZ”) through not just traditional public equity and debt markets, but also through private markets.

While private equity capital has been well-deployed towards sustainable finance, we believe the broad versatility of solutions-oriented private credit is positioned to play an important role in accelerating the transition into a low-carbon carbon-resilient economy.

Financing impactful firms

The broader consensus move to NZ creates investment opportunities in select sectors targeted as priorities by large asset owners and corporations.

While many large companies are creating meaningful in-house contributions to the climate transition, some of the most impactful solutions are coming from entrepreneurs within fragmented, under-financed markets working directly with corporate partners.

Such corporate consumers of sustainable goods and services often find it more accretive to purchase and scale an externally sourced product or service than to allocate such development to balance sheet.

While equity is a necessary component of business development, particularly in funding earlier stage technological and business development activities, properly structured private credit capital can help catalyse growth.

Drawing on structured, specialty and infrastructure finance methodologies, private lenders can provide well-covenanted tailored liquidity to borrowers not typically available in public markets.

As enterprises seek to scale disruptive climate solutions, access to low-cost capital will remain a key driver of a virtuous cycle of asset creation.

Sustainable private asset managers have an obligation to be more than simply capital providers to their partners; they can help create mutual value through influencing corporate behaviours and actions.

Managers can provide guidance and technical support to growing enterprises seeking to overcome various challenges, including United Nations sustainable development goals (SDG) alignment; regulatory frameworks compliance; key performance indicator (KPI) transparency and environmental, social and governance (ESG) risk management.

Lombard Odier today sees increasingly active conversations around the issues of stewardship and engagement among its investee and investor partners, and we expect that collaboration to grow in 2022 and beyond.

Climate commitment

The forces driving the NZ transition are clear. COP26 provided further evidence of policy and social tipping points for recommitting to the Paris Agreement’s 1.5 degrees threshold.

The private sector is delivering novel solutions today to profitably adapt and reduce carbon emissions, while improving resilience.

Frameworks such as Rockström’s planetary boundaries provide a guide for investors who seek businesses that are adapting their business models to be profitable in a sustainable future.

“There is no question about the direction of travel anymore,” Rockström said. “The question is: can we act fast enough in order to land in a safe operating space for humanity?”

Much of the answer lies in action within the real economy, where private credit is essential to catalysing and scaling additional impact.

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(AU The Guardian) ‘Extreme Marine Heatwave’: Waters Off Sydney Set To Break January Temperature Records

The Guardian

Satellite data shows ocean surface 3C above normal as swimmers say water feels more like February and March

Surfers at Manly beach. Global heating, La Nina and atmospheric conditions are believed to be behind an extreme marine heatwave off Sydney. Photograph: Bianca de Marchi/AAP

Waters off Sydney are undergoing an extreme marine heatwave with temperatures likely at their highest levels on record for January.

Satellite data is showing the ocean surface off the coast of Sydney at 3C above normal, with swimmers and surfers reporting conditions that feel more like February and March than early January.

Prof Moninya Roughan, an oceanographer at the University of New South Wales and an expert in marine heatwaves, said the hottest water was covering an area of about 200sq km.

Roughan is waiting until new data becomes available in the coming weeks from a long-term ocean temperature monitoring station at Port Hacking, where temperatures have been observed since the 1950s.

But she said: “It appears now to be reaching those record levels and will likely be the hottest January on record. It’s an extreme marine heatwave.”

She said there were three factors behind the extra heat.

Global heating was pushing up background temperatures in the ocean, a La Nina weather system was helping transport warmer waters south, and atmospheric conditions were also playing a role.

“Marine heatwaves are having severe consequences on ecosystems and they can kill habitats,” she said.

An ocean heatwave depicted in this map off the coast of NSW. Photograph: OceanCurrent

She expected a large eddy would break off from the tip of the current and take warmer waters south of Sydney.

“I expect that water will hang around and push south over the coming months,” she said.

Prof Rob Harcourt, a marine ecologist at Macquarie University in Sydney, regularly surfs off Sydney beaches.

“It’s been over 21C in the water for over a month now. Everyone that surfs has been talking for weeks about how it’s felt more like February and March than December [when the heat started to build].”

He said the warmer water was likely bringing bull and tiger sharks into the area and also farther south. Other species would also likely be arriving on the warmer waters.

Harcourt said while some species may benefit from warming oceans, the change in ocean temperatures along the eastern coast of Australia was dramatic.

“A lot of animals will do poorly. A lot of animals that live in cooler waters, like seals and sharks, have a habitat that’s shrinking fast and the implications are hard to measure, but it’s likely to be dramatic.”

He said in recent weeks whale sharks had been spotted north of Sydney and tiger and great white sharks had been seen feeding off a sperm whale carcass on the state’s far south coast.

“Whale sharks do come down the coast but they’re rare,” he said. He said warm water arriving on the current was nothing new, but this arrival was particularly early and was unusually warm.

Research in the journal Nature has found marine heatwaves around the globe are becoming more frequent and are lasting longer.

Separate research suggests the southern points of the East Australian Current are also warming faster than the area farther north.

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