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The Risk Radar

October 2019: Consumer shaming

Shaming unsustainable consumer practices has reached multiple domains. The phenomenon that began with meat-eating and flying, has now spread to other industries. The goal of sustainable practices is to reduce society’s ecological footprint, a measure to ensure that the speed with which we consume resources and generate waste will be more in line with how fast the planet can recover from these habits. Growing consumer awareness and limited climate action in politics have led to the shaming of consumers’ everyday life choices. Besides flying and meat eating, driving SUVs, buying fast fashion, eating cheese, and even using Google’s search function have become shameful practices.

The rhetoric of shaming is seen as a threat to businesses. The clothing industry is the latest target of shaming, as the industry is highly unsustainable. According to the UN Economic Commission for Europe, the $2.5 trillion industry is responsible for roughly 10% of global greenhouse gas emissions and consumes more energy than aviation and shipping combined. Meanwhile, the UN argues, low-priced fashion encourages consumers to buy more frequently and to throw away still-wearable clothing instead of buying less and reusing clothes by buying second-hand. In a recent interview, the CEO of fast-fashion retailer H&M expressed his worries about the heightened scrutiny that the fashion industry is facing over its environmental impact.

Shaming consumers is not just a threat to businesses, but also poses a societal risk. It might fuel polarization in society. As we wrote before, the personal has become exceedingly political. As consumer tribes are groups of people emotionally connected through similar consumption values and similar practices can strengthen bonds between people, these judgements may underline the differences between groups. This could result in more intense polarization. Especially as businesses leaders are framing the situation as a trade-off between sustainability and economic welfare, this can give rise to polarization. Indeed, while the H&M CEO recognizes the need to reduce environmental impact, he adds that the industry “must also continue to create jobs, get better healthcare and all the things that come with economic growth.” This kind of rhetoric might fuel a further divide between the wealthy, highly educated consumer and the rest of society.

Implications:

  • Although one can stop consuming meat and start buying second-hand clothing and furniture, new organic, sustainable alternatives are often more expensive than the more polluting products. In multiple Western countries, ordering a salad is often more expensive than ordering a burger. A more sustainable lifestyle can thus be associated with a more expensive lifestyle, even if living sustainable does not have to be more costly (meat is often expensive). Among American consumers, Whole Foods is cynically called Whole Paycheck. Families struggling to put food on the table will find it intolerable to be shamed for their food choices. Shaming unsustainable consumer practices might thus lead to a backlash from those who cannot afford sustainable lifestyles.
  • Those living sustainably by default, not being able to fly around the globe and afford a luxury lifestyle, are often hurt by price hikes in the name of sustainability, such as increased fuel prices. The Yellow Vest Movement was sparked by this catch 22 of ecological versus economic wellbeing, hitting those at the economic bottom the hardest and leading to protests against the polluting, global elite.
  • Shaming consumer behavior might be impactful in clearly visible and explicitly unsustainable practices (e.g. flying), but disregards other, less visible areas such as housing. Thus far, shaming has not included some of the most impactful, but hardly visible, consumer choices such as domestic heating.

RISKS MARKED ON THE RISK RADAR AS NUMBER 3: rising inequality

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October 2019: Backlash against the elite

Across Lebanon, Chile, Hong Kong and Iraq, people are protesting corruption, tax hikes and the political elite, often wearing Joker make-up or masks. After the Yellow Vests movements earlier this year, new protests have erupted globally. Since The Joker came out in cinemas globally, the Joker has been visible as a symbol of protests on the streets, particularly in Lebanon.

Although the reasons for protests and the ways in which people feel suppressed differ, the circulating images of police repression violence are very similar and the face popping up with more frequency is also the same across countries; the face of the Joker in Todd Philips’ recent movie, which has already hit the $850 million mark in global revenues. In September, as the movie was feared for its evocative power, cinema chains in the U.S. already banned masks, costumes and toy weapons at screenings of Joker. In Hong Kong, masks of Pepe the Frog (a symbol of the alt-right movement) and Winnie the Pooh (ridiculing the Chinese President Xi Jinping) are spotted at demonstrations and the Guy Fawkes face, from V for Vendetta, is globally still the most-used mask during protests, but the Joker has made a rapid entry. It serves as a timely symbol for vulnerable groups in society to express their feeling of being treated as or viewed as clowns. They feel that the majority of the people are not being heard by those in power, be it because of endemic corruption in Lebanon, suppression in Hong Kong or a metro fare hike in Chile. The Joker face is not necessarily politically right-wing or left-wing, but the face of vexation over social neglect by the powerful elite.

As we wrote earlier, in many countries around the world, a large part of society is not experiencing progress, while inequality is growing and wealth is concentrating around the elite. As a result, dissatisfaction with the wealthy elites who are in power is growing, corruption and precarious living conditions are becoming increasingly unacceptable.

As the IMF published in its biannual global economic outlook, after a sharp decline in economic growth in 2018, there will be no more growth this year. IMF explains how rising trade and geopolitical tensions have fueled uncertainty about the future of the global trading system and international cooperation more generally, taking a toll on business confidence, investment decisions, and global trade.

Implications:

  • The outbursts of civil unrest that have quickly erupted simultaneously and worldwide have gained attention in financial markets. For instance, they have made investors wary that the resulting pressures on stretched government finances will be one of many consequences.
  • As recovery of economic growth is not in sight, protests are not likely to end anytime soon. On the contrary, they might even inspire people in other countries that face a politically corrupt system, price hikes in basic necessities, or other forms of oppression.

RISKS MARKED ON THE RISK RADAR AS NUMBER 2: Tensions throughout the Middle-East, rising inequality

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October 2019: India’s weakening soft power

The democratic image and soft power of India is losing force. National and international criticism of Indian leader Narendra Modi is growing. For the prime minister of a fast-growing and the world’s fifth-largest economy, a slowdown of the economy does not bode well and will likely fuel wider criticism of his leadership style. The Modi government’s leverage hinges strongly on being one of the fastest-growing economies in the world. Growth fell from 8% in the middle of last year to 5% year-on-year in the most recent quarter. Although Modi is seen as a leader who is good for business and the economy, there are worries that the economic troubles might be more than cyclical. Moreover, unemployment is on the rise, posing a challenge. The risk is that Modi will not push for the necessary economic reforms (labor, tax and financial sector reforms) and focus more on projecting his power through nationalist politics instead.

As a rising superpower and the world’s largest democracy, India, unlike China, for example, is more susceptible to accusations of infringing on the freedom of its citizens.

The ongoing proxy war with Pakistan in Kashmir and the encroachment on civil freedom in the latter region are among the main points of internal and external contention. In August, the Indian government revoked Article 370 of India’s constitution, which guaranteed special rights to the Muslim-majority state, the most far-reaching political move regarding the disputed region in nearly 70 years. Currently, eight million Kashmiri Muslims are living under security lockdown, have no internet connection and are restricted in the transport of people and goods. A record of 3000 people are jailed. This crackdown on Kashmiri Muslims is called a move of punitive populism, a political strategy that refers to leaders’ use of tough-on-crime rhetoric and policies to gain popular support. As the economy weakens, Modi’s attention seems to be focused on strengthening his mandate by protecting the nation from an “enemy” in the form of the Muslim minority in the Jammu and Kashmir region.

Another threat to India’s democratic functioning is the fact that freedom of speech is compromised. Indian news media did not seem to express any criticism of the government’s decision to revoke Article 370. Meanwhile, India is under fire for leading internationally in temporary internet shutdowns. And finally, the country is considering censoring streaming platforms like Netflix and Amazon Prime Video. These are all stains on the democratic soft power image of India.

Modi’s actions in Kashmir do not only reflect a crackdown on democratic values, but also point to a centralization of power in a country that has heretofore been governed in a decentralized way. Seeing this increasing centralization of government power, critics have expressed worries that India cannot work from the center. India was among the first countries to constitute a federally governed multicultural democracy. But Modi revoking the special rights of Kashmir has nullified this, showing that the government is pursuing a Hindu nationalist agenda.

Implications:

  • Although Modi was convincingly reelected, as economic performance declines further, support for Modi and his party BJP will dwindle. In the state Haryana, the highest rate of unemployment can be linked to a fierce drop in support for the BJP. The question remains how long Modi’s Hindu nationalist, punitive populist agenda can serve as a narrative to support his leadership.
  • A slowdown of the Indian economy is a real risk considering the fact that new economic reforms are highly needed while Modi does not seem willing to act.
  • There is no reason to assume the Kashmir conflict will end anytime soon, leading to more international disapproval and heightened tensions and trade restrictions between India and neighboring countries.

RISKS MARKED ON THE RISK RADAR AS NUMBER 1

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September 2019: Treats to multilateralism

Multilateralism is under rising pressure. As the strategic rivalry between the U.S. and China poses a further and ongoing sharp challenge to international organizations, some speak of a crisis of multilateralism. Several forces have increased pressure on the multilateral system and point to a global order in which the only solutions are transactional rather than dictated by internationally agreed upon rules.

First, as we wrote before, the world is witnessing an increased number of international sanctions to pursue foreign policy objectives. Especially the U.S. has been relying on sanctions more frequently. In light of the rise of China as a challenge to U.S. hegemony, it can only be expected that the U.S. will impose more sanctions and tariffs. But other countries are imposing a lot of sanctions as well. Think of Japan’s sanctions on South Korea, in line with the rising tensions between the countries. In general, the rule of the “game” of sanctions seems to be that stronger powers impose their will on weaker counterparts, a dynamic that should be less common in a world that is built around multilateral systems.

Second, the U.S. is paralyzing the World Trade Organization, the main arbiter in global trade. The most immediate threat to the functioning of the WTO is the stalling of the dispute settlement process in the appellate body of the organization. As the White House deliberately blocks appointments to it, no new members are approved, and the body will stop functioning by December 2019. In fact, the functioning of the WTO has been under pressure for years; take the Doha Development Round trade negotiations that began in 2001 and aimed at lowering trade barriers around the world, but never led to an agreement. As a result, the WTO is considered less and less of an effective tool by the U.S. when it comes to realizing its own trade interests, leading it to take other routes to negotiate with countries.

IMPLICATIONS:

  • Shifting from a rule-based system in governing trade disputes to one based on power and bilateral negotiations will result in more trade uncertainty in the global economy. This, in turn, will contribute to a slowdown in trade and manufacturing activity, higher financial-market volatility and currency instability, declining capital flows to emerging economies, lower investor confidence, business spending, and productivity. The World Bank and the IMF continue to revise downward their economic growth forecasts.
  • The rise of China is less a sign that there is a new sole hegemon in the making than a harbinger of a future multipolar world order in which different countries will lead in different domains. National champions will become of greater strategic importance to countries. This poses a risk to countries and regions (such as the EU, Japan) that heavily depend on the functioning of the multilateral system at the end of the Atlantic era. They will have to find new allies in a more fluid world order. Even the U.S., despite its America-first rhetoric and protectionist stance, is actively creating new relationships in order to hedge against China’s rise. For instance, over the past two years, the U.S. has been actively engaging with the EU and Japan in a trilateral format on U.S. terms.
  • A shift in global power relations will pose a normative challenge to the current multilateral system. Rising Asian superpowers will show contrast to normative Western frames that underlie the multilateral system as it is, such as human rights and democratic values.

RISKS MARKED ON THE RISK RADAR AS NUMBER 3: Protectionism, policy uncertainty

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September 2019: The Horn in turmoil

The Horn of Africa is in turmoil. The region stretches from the north of Sudan to Somalia, including Ethiopia, Eritrea and Djibouti, and onwards to the Somalian and Kenyan coast. Multiple developments are causing increased tensions in the region.

First, although the region has long been an arena of great power competition, today it sees a new rivalry playing out on its shores. Over the last years, the Red Sea area, which encompasses the Horn of Africa on the one hand, and the Gulf States on the other, has regained international attention. The Arab Uprisings resulted in a leadership vacuum in Middle Eastern states such as Syria, Egypt and Iraq in 2011 and 2012, causing the leaders of the Gulf States to show more assertive leadership. As they began to look for new spaces onto which to project power, many Gulf States turned to the Red Sea and the Horn of Africa because of these areas’ enormous economic potential. All the Gulf States attempt to legitimize their presence by saying they’re pursuing stability in the region. However, many new Gulf-Horn relationships are highly asymmetrical and could further destabilize fragile local politics. Meanwhile, African leaders as well as Gulf and Western allies have only begun to discuss how to prevent the increased competition in the region from resulting in conflict.

Second, Sudan is in the midst of a revolution. Sudan’s military junta and opposition have agreed to form a civilian-led administration to steer a transition toward free and fair elections. But the generals are inexperienced and the transition is a complex one. And with repeated mass strikes (million-man march in June) Sudan’s citizens have shown that they will not accept superficial change, nor a return to the old ways. And six weeks after the transitional power-sharing deal, the Sudanese don’t see any changes.

Third, Al-Shabaab’s actions are destabilizing Somalia, a country with an already weak government. The al-Qaeda-affiliated militant group forms a potent threat to Somalia’s internationally recognized central government, frequently carrying out bomb and gun attacks against Somali military and other targets. The Global Terrorism Index lists al-Shabaab among the deadliest terror groups globally. It demands a strict form of Islamic government or caliphate to replace existing state authorities they perceive as secular, thus destabilizing local politics. Furthermore, last month, Al-Shabaab attacked a U.S. military base near Somalia’s capital, Mogadishu, and detonated a car bomb targeting a European Union military convoy.

Fourth, Ethiopia is undergoing a difficult political transformation. Ethiopian Prime Minister Abiy Ahmed, who came into office in 2018, has pushed to liberalize his country’s economy as well as its political landscape. But this summer, rights groups voiced concern when several activists, journalists and politicians were arrested, as anti-terror laws following the killings of government officials were still being used. Ehtiopia’s process of democratization remains a precarious one and has been neither linear nor peaceful. But the success of the process is of paramount importance to the region, since the country serves as a powerhouse and an isle of hope for the rest of the region.

IMPLICATIONS:

  • Instability increases the region’s vulnerability in the current scramble for Africa. Saudi Arabia, the United Arab Emirates and Qatar have expanded their presence in the Horn. Either trying to reduce their dependence on oil by investing in African markets, investing in infrastructure on the continent to increase trade or increasing investments in agriculture in order to secure their own food security. Another reason is the Gulf States’ aim to improve their relationships to China through economic cooperation in the Horn. Therewith, the U.S.’ position as dominant power player (and mainly as peacekeeper) in the Horn is challenged. The Horn thus falls prey to the competition of external powers.
  • If instability increases and results in conflict, this might spark mass migration away from a region with a large and fast-growing population.

RISKS MARKED ON THE RISK RADAR AS NUMBER 2: Scramble for Africa, large-scale migration

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September 2019: Migration to Europe

Although the European migration crisis seems to have had its peak in 2015, last month has shown that the crisis is far from over. The situation in the Middle East has become more volatile, creating ripe conditions for new conflicts that could drive groups of migrants out of the region, especially now that Turkey has launched an offensive into North Syria.

The Greek islands, the busiest European entry point for migrants and the location of Europe’s biggest migration camps, experienced a surge in arrivals of migrants over the past month. A total of nearly 10,000 migrants arrived in Greece last month, the highest number in the three years since the EU and Turkey implemented a deal to shut off the Aegean migrant route. Although this is still a fraction of the number of migrants arriving in Greece at the peak of the refugee crisis, the camps are already filled beyond capacity. The EU has been strongly criticized over conditions in Greece’s largest refugee camp Moria, where 13,000 people are living in a facility designed for 3,000. Other Greek islands, including Kos and Samos, are also struggling with over-capacity. Recently, a fire in Moria killed a woman and child, triggering protests among migrants. Following this incident, the UN called for migrants to be immediately transferred to other European countries, but so far, the redistribution of migrants across the continent has been sluggish. This has triggered France and Italy to call for a new system to automatically redistribute migrants across the EU.

Last month, Turkish President Erdogan threatened to “open the gates” to Europe for the 3.6 million Syrian migrants it hosts. Erdogan called on Europe to increase support for Turkey’s efforts to ensure security in Syria’s Idlib to avoid further migration. Under the 2016 agreement with the EU, Turkey has curbed the number of migrants reaching Europe over the Aegean Sea, but only €2.22 billion of the pledged €6 billion of aid were disbursed to improve living conditions of Syrian refugees in Turkey. Erdogan’s threat to open the floodgates could pose major problems for a Europe still recovering from the latest migrant crisis.

While the EU is still struggling with the migrant crisis resulting from the Syrian civil war, another frontier is posing similar challenges. Besides supporting Turkey, the EU has funded the Libyan Coast Guard to keep migrant boats from North Africa away from the continent. As a result, tens of thousands of migrants are trapped in Libya, where they live in dire conditions in cramped detention centers, sometimes being sold as slaves or forced into prostitution. In a New York Times interview, Camille Le Coz, an expert with the Migration Policy Institute in Brussels says: “European countries face a dilemma. They do not want to welcome more migrants from Libya and worry about creating pull factors, but at the same time they can’t leave people trapped in detention centers.” The bloc’s approach to migrants has been sharply criticized by humanitarian and refugee-rights groups, not only for the often-deplorable conditions of detention centers, but also for the small number of migrants that are actually able to gain asylum on the continent. Now, as a way to keep migrants out, Europe plans to sign an agreement with Rwanda, which will take in about 500 migrants evacuated from Libya and host them until they are settled in new homes or sent back to their countries of origin.

IMPLICATIONS:

  • The question remains how sustainable Europe’s “solutions” to keeping migrants away are. Especially since steep increases of migration in the near future are not improbable. Research indicates that climatic conditions, i.e. severe droughts and related armed conflict, already contributed significantly to rising numbers of asylum seekers between 2011 and 2015. By mid-century, there could be over 140 million climate-migrants, mostly from Sub-Saharan Africa, as a result of tougher crop-growing conditions, poverty, erratic food prices, and conflicts over scarce resources forcing people from their homes. We’ve previously described the risk of climate migration in the Risk Radar.
  • Migration rhetoric will further color the political landscape in European countries. Erdogan’s threat shows that despite the fact that fewer migrants and refugees are entering Europe, anti-migrant rhetoric is persistent.

RISKS MARKED ON THE RISK RADAR AS NUMBER 1: Tensions throughout the Middle-East, large-scale migration

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August 2019: Backlash against maximizing shareholder value

In August, the Business Roundtable, a prominent group of the U.S.’ largest and most powerful CEOs, stated that maximizing shareholder value should not be a company’s sole objective. The view that led the CEOs of the capitalist country to favor shareholders over stakeholders, such as employees and the environment, is no longer seen as apt. This is remarkable, since the Business Roundtable has a long track record of defending business against accusations of disregarding the broader interests of society.

In light of growing inequality and the increasing risk of social upheaval, CEOs of leading corporates have started to see their approach of maximizing shareholder value as a threat. The CEO-worker pay gap is now better documented than ever and wage inequality is still considered an underestimated risk for companies. Moreover, with the 2008 financial crisis still fresh in mind for millennials, who will make up 50% of the U.S. workforce within the next year, the wish for more long-term value instead of short-term profits is well-represented. Also, millennial investors are focusing more on ESG than previous generations. Similarly, in times of great power of institutional investors and their turn towards more socially responsible and sustainable investments, such as the world’s largest asset manager BlackRock, CEOs are further pushed to abandon the long-held view of “shareholders first”.

As a response to these tendencies, CEOs have no alternative but to emphasize that they value more than just their shareholders and to show their engagement with public purpose. But for now, critic and economist Joseph Stiglitz argues the announcement at the Business Roundtable remains a publicity stunt in the face of a popular backlash against widespread misbehavior and it remains to be seen whether it will lead to U.S. leading firms taking on a stakeholder value approach.

Implications:

  • Share-price primacy has become a threat to businesses. Western capitalist society will increasingly demand more inclusion of the environment and of employees when it comes to benefiting from the value creation of corporates.
  • Traditional shareholder-first companies will increasingly face competition from alternative organizational forms. For instance, in contrast to Anglo-American organizations that focus on short-term profits, Rhine model organizations focus on long-term relationships (e.g. enduring employment of managers, contracts with suppliers).
  • As we wrote before, the widening gap in the U.S. has sparked debate on worker rights and seems to interest both Republicans and Democrats in the current U.S. presidential campaign. While Republicans are focusing on traditional strategies involving labor unions and co-ops, Democrats are taking a more radical approach by proposing worker ownership, i.e. measures to ensure that workers become board members or shareholders of the firms at which they work, or that they have priority in the right of acquisition of the firm.
  • Companies will increasingly be publicly scrutinized as to whether they’re paying their fair share of taxes. Especially growing awareness of big tech tax avoidance will lead to a global hunt to tax big tech or the coming of digital tax.

RISKS MARKED ON THE RISK RADAR AS NUMBER 3: Rising inequality

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August 2019: Deforestation crisis

The world’s largest rainforest is becoming a burning political issue. At the latest G7 meeting, the Amazon was among the most hotly-debated topics. Half the planet’s rainforests are in the Amazon, which has a crucial function not only as the “lungs of the earth” (it produces 20% of the oxygen we breathe) but also as an enormous air conditioner: keeping the earth cool (storing vast amounts of planet-warming carbon dioxide) and humid (by its water-recycling function). Moreover, it is the habitat of thousands of species and thus important to Earth’s biodiversity. However, Brazilian President Jair Bolsonaro has pledged to open up the two-million-square-mile forest to more farming and mining. Since he took office, deforestation has already gained speed.

Over the last month, record numbers of raging wildfires linked to deforestation have been diminishing the Amazon. Although Brazilian Minister of the Environment Ricardo Salles blamed “dry weather, wind, and heat” for the rising number of forest fires, the wildfires are accompanied by the surge in deforestation and there is clear evidence that the recent rise in deforestation is partly the result of pro-development policies of Bolsonaro. This has caused global anger and concern, and has led the other G7 leaders to offer 20 million dollars in emergency aid to help battle wildfires in the Amazon rainforest. However, Brazil rejected the offer, slamming the gesture as colonialist. Indeed, Bolsonaro’s success is partly due to his casting himself in opposition to the rich global North. In the past, the other G7 countries have certainly taken part in large-scale deforestation with the same motives of making room for agriculture, infrastructure, and urbanization as a result of industrial modernization. Now, Brazil likewise seeks to capitalize on the rainforest for the country’s economic development as it has done before. The world’s eighth-largest economy is a diversified economy, but a significant part of it was built on the destruction of the rainforest, a fifth of which has already disappeared.

In Indonesia, the rainforest is also falling prey to pro-development policies. In the world’s tenth largest economy, the intentions of nationalistic president Joko Widodo are a cause for similar concerns over the world’s rainforests. As the country’s capital is plagued by insurmountable challenges such as catastrophic pollution and traffic congestion, the government has announced its plans to move the country’s capital from the megalopolis of Jakarta to the sparsely populated island of Borneo. However, these plans threaten the world’s third-greatest rainforests, which Borneo is home to.

The world’s second-largest rainforest, located in the Democratic Republic of the Congo, is also at risk. Deforestation is gaining speed in the African country. According to a 2018 study, at current rates of deforestation, all primary forest in the DRC will be gone by the end of the century. The main cause of deforestation here is actually small-scale clearing for subsistence agriculture.

Implications:

  • The wildfires in the Amazon are a trigger for accelerated climate change. Instead of absorbing CO2 as the forest ordinarily does, a burning forest produces massive amounts of CO2, causing global warming. Experts fear that Brazil is entering such a vicious cycle.
  • As resource nationalism is on the rise and forests are “claimed” by national leaders as a resource a country has a right to exploit (as Bolsonaro has expressed it), deforestation will not easily be curbed by international cooperation or global governance (as Bolsonaro’s rejection of the $20 million shows).

RISKS MARKED ON THE RISK RADAR AS NUMBER 2: Climate change, resource Nationalism

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August 2019: Resource nationalism

Recently, Indonesian president Joko Widodo announced a possible export ban on nickel ore sooner than anticipated by the market, raising the risk of a tighter supply next year. The original plan was for Indonesia to ban exporting nickel ore by 2022, as part of the country’s plan to build up its manufacturing base by using the country’s raw resources. Indonesia’s nickel miners association has urged the government not to advance the ban from 2022 and to pursue further “resource nationalism”.

Resource nationalism is the tendency of governments to take greater control of natural resources. This can take the form of government measures such as tax pressures, changing contractual terms and strict regulations of the mining sector. According to the latest Resource Nationalism Index, globally, the risk of resource nationalism has increased over the past year, which can be explained by the emergence of protectionism and nationalism. As many as 30 countries have registered a significant increase in resource nationalism risk metrics, 21 of which countries are considered major producers of oil, gas and minerals.

Resource nationalism is mostly a response to two cyclical processes in a country. The investment cycle pushes countries rich in resources first to adopt liberal regulations. If investments are made, governments start to regain control over the resources. Another cycle is the electoral cycle. Incumbent governments often seek to increase their support by exploiting the populist appeal of resource nationalism, as is currently happening in Zambia.

The index specifically mentions Russia and the DRC, which were downgraded to “extreme risk”. The DRC is a bellwether for a broader tendency of resource nationalism on the African continent. Although Africa has long been recognized as a high-risk area, the report shows that the risk has increased in 10 African nations over the past year. Over the past two years, international miners and their host governments have especially clashed over tax changes and other regulatory imposts in the DRC and in Tanzania. Both countries rewrote their mining codes, claiming that the existing regulations unfairly benefited foreign investors at the state’s expense. This tendency of resource nationalism has also reached Zambia, a country bordering both the DRC and Tanzania, and the world’s seventh-largest copper producer, as its government has gradually been clamping down on private, and particularly foreign, influence in the mining sector.

Implications:

  • The term “critical” is added to natural resources increasingly often, resulting from growing awareness of global trends, such as population growth, increased consumption, and pollution. As the criticality of resources increases, resource nationalism will further rise globally.
  • As we wrote before, critical resources might in future no longer refer only to the usual suspects such as oil and minerals. Indeed, oil and rare earth metals are critical resources for our modern industrialized society. However, over the last months, many alarming reports have informed us about a new class of critical resources. Traditional natural elements such as land, water and air are now increasingly being framed as such. For instance, in its latest report, the internationally accepted authority on climate change, the IPCC, calls land a “critical resource”. The criticality of fertile land, freshwater and clean air are a risk to the basic foundation of living in all countries.

RISKS MARKED ON THE RISK RADAR AS NUMBER 1: Resource Nationalism

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July 2019: Biodiversity loss

More species than ever before in human history are threatened with extinction. The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) recently published its findings that around 1 million animal and plant species of the totally estimated 8 million animal and plant species on Earth (including 5.5 million insect species) are now threatened with extinction, and the rate of extinction is increasing. Therewith, the health of ecosystems on which we and all other species depend is deteriorating more rapidly than ever. The report assesses changes over the past five decades, providing a comprehensive picture of the relationship between economic development pathways and their impact on nature. The causes are changes in land and sea use; direct exploitation of organisms; climate change; pollution and invasive alien species.

What does it mean that earth is losing a large share of its species? Biodiversity is more than a sum of individual species. For instance, more than half of the carbon dioxide produced by humans is stored by nature on land and in the oceans, but without large nature reserves, the temperature on earth would rise much faster. The fact that rainforests are disappearing at a rapid pace increases the climate problem. Biodiversity can thus be seen as a kind of insurance policy to cope with changes such as the ones linked to climate change. More crucially, biodiversity is humanity’s most important life-supporting safety net. For instance, as ground organisms such as fungi and worms die out, the soil becomes fruitless and thus the basis of the ecosystem is lost. Similar is the case of insects, such as pollinating bees. As this interconnected web of life on earth gets smaller and increasingly frayed, it’s stretched almost to breaking point. This constitutes a direct threat to human well-being in all regions of the world, eroding the very foundations of our economies, livelihoods, food security, health and quality of life worldwide.

The problem is that we do not know what would happen if all these species were to disappear. As we wrote earlier, natural ecosystems can be considered “complex systems”. Outcomes are difficult to model because of the many and insecure dependencies, relationships and interactions between the parts that form the whole. Thus, we do not have the skills and knowledge to intervene in natural ecosystems, which are highly complex and have a high degree of uncertainty. We thus cannot even fully assess the value of a large biodiversity, let alone the risks of losing it.

Implications:

– The IPBES report states that current negative trends in biodiversity and ecosystems will undermine progress towards 80% of the assessed targets of the Sustainable Development Goals related to poverty, hunger, health, water, cities, climate, oceans and land (SDGs 1, 2, 3, 6, 11, 13, 14 and 15). Loss of biodiversity thus proves to be not only an environmental issue, but also a developmental, economic, security, social and moral issue.

– According to the report, we still have the means to ensure a sustainable future for people and the planet. Nature can still be conserved, restored and used sustainably if we achieve “transformative change” (a fundamental, system-wide reorganization across technological, economic and social domains). Policies to preserve biodiversity are gaining momentum, as we wrote earlier, but it is questionable whether this will drive the transformative change needed.

– Loss of biodiversity will continue until 2050 and beyond in all of the policy scenarios explored in the report (except in case of transformative change), due to the projected impacts of increasing land-use change, exploitation of organisms and climate change.

RISKS MARKED ON THE RISK RADAR AS NUMBER 2: food security, climate disasters

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