Palladium Managing Director, Jose Maria Ortiz
Looking ahead to 2023, I can’t imagine it’s going to be an easy year. At the very least, it’s going to be complicated. There’s no end in sight to the war in Ukraine and as we’ve seen now for nearly a year, its ripple effects have been felt globally. We’re facing down what looks to be a recession and a cost of living crisis, which will inevitably draw attention, capital, and legislation away from the continued climate crisis.
And climate change? Without a doubt, we will continue to experience its impact during 2023. It’s no longer a question of whether it will happen – it does and will continue to do so with more force every year the crisis continues unchecked, each time leaving more people in need of assistance.
But I’m not without hope.
Following COP27 in Egypt, I’m heartened to see collective enthusiasm around the energy transition. There is, and I envision in 2023 we will continue to see, an enormous push in this space. We’ve already seen the latest pledge from Indonesia to reach net zero by 2060 and the United States Inflation Reduction Act, which allocates US$369 billion in funding to tackle climate change, and indicates a willingness to not only commit to, but to fund the transition. It won’t come cheap, and it won’t come easily.
We already know that shifting away from fossil fuels cannot happen overnight, which puts us globally in an in-between stage. While many countries have committed to the energy transition, we don’t yet have the technology, capabilities, and infrastructure in place to flip the switch to renewables. I expect this year will present us with a transition time, one that includes the reskilling of workforces for green jobs, a great shift of investments into renewable energy for both governments and corporations, and more attention on ensuring we have the infrastructure in place to support the change.
Shorter More Resilient Supply Chains
Another shift already underway is that of the focus on resiliency and security. Global economies have experienced shock after shock in the last two years and maintaining stability moving forward means ensuring that we’re secure and resilient enough to withstand more shocks to come. Much of that will come down to supply chains, the shortening of value chains, and placing more of an emphasis on equipping local suppliers to meet growing needs closer to home.
I expect that we’ll see companies, multinational organisations, and governments looking more locally to strengthen and shorten value chains. Doing so will not only make them more resilient but is one of the many answers to lowering carbon footprints. As we face down global food insecurity, it’s no longer an issue of whether commodities or food is cheaper – it’s whether it will arrive at all, and that’s what resiliency will ensure.
The idea of resilience and providing solutions for those that are most vulnerable amidst an economic crisis will be high on the agenda of developed economies. Already, we’ve seen enormous spending by countries like the UK and U.S. domestically to lift their people up and out of poverty. And yet, this is not enough as inflation will continue to hit them disproportionately, while paradoxically the same countries have huge labour shortages. A lot of focus will need to be on helping those vulnerable people of working age that have been excluded from the job market to return to good jobs.
Finally, and perhaps most excitingly is the growing momentum around nature-based solutions. It’s an unstoppable movement and I believe that 2023 will bring not only more focus on carbon but an increased focus on biodiversity and the role it has to play in our fight against climate change. While I don’t expect we’ll see any major developments, I do think it will be a year of increased attention and improvements made to standards for carbon and biodiversity credits and the emergence of other ecosystem services.
But we can’t talk about nature-based solutions, restoration, and increased focus on biodiversity without talking about Brazil. As the country welcomes in a new president with high hopes for putting climate back on the agenda, the world will be watching and investing in the restoration and protection of the Amazon rainforest, one of our planet’s greatest carbon sinks.
Complicated but hopeful is my outlook for 2023. None of the solutions to these global problems are simple, but at the very least, we already know what the solutions are, and they are within our grasp. We simply need to begin implementing them.
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