Metamorphosis! Hard Truths & Unicorns

By Debra Tan 17 April, 2020

With blanket disruptions globally, we are forced to rethink our future. Cocooned, we now have a once-in-a-lifetime unicorn opportunity to morph toward business unusual, but can we take advantage? CWR's Tan ponders

The longer COVID-19 is free to roam, the more businesses will be forced to transform; with world on pause, now is a good time as any to go all-in on the transition to low-carbon economies
The US looks like its backing BAU, but does it make sense to bailout leveraged & highly polluting businesses? Meanwhile, China may drop GDP targets to fast track a 'Beautiful' new norm
The future of money looks precarious + our future is not safe. Our current core programming is set on a self-destructive loop - we must breakout, re-write our stories to flatten the climate curve

It has been a good three months since we have had to live with COVID-19. Those that laughed at Hong Kong’s obsession with toilet roll are not laughing now. With plenty of time to reflect on some hard truths in these COVID times, we have been pondering ‘Business Unusual’. This is one of CWR’s three focus areas, and the most difficult to deliver due to the ‘stickiness’ of business-as-usual. But then along came a virus and now economies, businesses and supply chains around the world are imploding. With blanket disruption globally, every government, business and individual is forced to rethink our future.

The longer this virus is free to roam, the more we will emerge into a new world order

Let’s face it; the longer this virus is free to roam the earth, the more likely we will emerge into a new world order in politics and in business. The longer we stay cocooned in lockdowns of varying degrees, the more businesses will be forced to transform as our needs and priorities change.

Suddenly, the stickiness of business-as-usual is uprooted. Now, we have a chance to reset/re-define business for long term good and not short term profits.

Why wait to transition? Go all-in on low-carbon economies now

So why delay our transition to a low-carbon economy? We will never be ready and now, with pretty much the whole world on pause is a good a time as any. We should start now.

The new hope of a business unusual reset

Meta-morph for the earth and our future…

Metamorphosis springs to mind and the beneficiaries here are obvious – the earth and our future. 2020 emissions will likely be lower than last year by 5%, bringing us to the lowest levels for around a decade.

If we continue this way, we may well end up with a 1.5°-2°C world instead of 3°-5°C where we were heading. But to wish continued lockdown to stave off an inevitable climate crisis for the next 10 years (to steer the world back on track) is an untenable trade-off and unrealistic.

… “something good will have to come out of this when we emerge on the other side”

Yet, many of us hold onto the belief and hope that “something good will have to come out of this when we emerge on the other side.” Surely, “something good” would be a better future where less people die from things that we could have prevented or mitigated – like the spread of this virus, like the climate crisis. A healthier environment is another good cause – skies around the world have never been bluer. The next time, we tell ourselves, we will be prepared and we will focus on saving lives instead of making money.

We are creative, let’s redesign & build truly sustainable businesses…

…let’s not bailout precariously leveraged, dirty & thirsty businesses that hasten our climate crisis

There’s a lot of stupidity, but there is also a lot of solidarity, compassion and imagination. So let’s make use of this time in lockdown to channel our creativity to dream of/ redesign/ build new businesses that are truly sustainable when we emerge on the other side. Let’s definitely not bailout or support precariously leveraged and highly polluting businesses with suspect ESG practices that will just hasten the climate crises. Of course we need to ensure jobs, but surely governments can spend our hard earned tax dollars in a better way? Let’s go all-in on business unusual.

Yes, but no … US prematurely killing the opportunity to morph

Unfortunately, initial signals from the US are contrary – Amnesty International has accused the US of abusing the COVID-19 crisis to achieve its goal of gutting US environmental regulations. Also, large corporations are allocated the largest slice of the US government bailout of US$2trn, while state & local governments received slightly more than half of this amount for COVID-10 response. Those on the front-line such as public hospitals were only given a mere fifth of the US$500bn earmarked for large corporations.

Unfortunately, the US$2trn US bailout is looking like a firm push to return to BAU post-COVID

While the airline industry (big emitters) received US$58bn, the final distribution of the rest of the US$442bn for large corporations is left to the Secretary of the Treasury. Given the Trump administration’s poor track record with climate change and love for all things coal and oil, sadly, the bailout is looking like a firm push to return to business-as-usual post-COVID.

But what’s the only country tentatively emerging on “the other side” of its stringent COVID-19 lockdown doing to restart its economy?

China … emerging on the other side to a new normal

Lockdown has been lifted and life in China is going ‘back to normal’. But life is far from normal as ‘normal’ now includes face masks, serial hand sanitizing, temperature checks and a personal COVID exposure risk QR code on your smartphone. In Hong Kong, we are doing the same except in lieu of a QR code, we check the government tracker or this app for maps of buildings/places/planes/taxi where those infected by COVID have stayed/been.

Masks, temperature checks, QR codes are now the new normal in China …  it won’t be normal for a while, so don’t focus on WHEN but WHAT our future normal will be

So for those of you who are still fixated on when things are going to return to normal when we can freely roam around without a mask or checks, they are not; at least not for a long while. In Hong Kong, one of the “better-COVID-performing areas”, we have been at this since January and are now likely emerging from our second wave post-Easter. So instead of focusing on the when, think about what our future normal will be.

With some semblance of ‘normal life’ is resuming, China’s restart of the economy is reflected by a rise in carbon emissions, albeit less than before (18% lower than usual levels). But we remain optimistic that China is not going to return ‘guns blazing’ to business-as-usual. It couldn’t even if it wanted to as global trade cannot resume thanks to the pandemic.

Dropping GDP targets and fast tracking reforms for Beautiful China?

We remain optimistic that China is not going to return ‘guns blazing’ to BAU…

These are interesting times for China. Even setting its all-important GDP growth rate target is causing great internal debate. Usually announced at China’s NPC meetings in March (which did not take place), China’s economists are split on whether to announce a GDP growth rate target.

Some economists including Dr. Ma Jun have argued that setting a target now could “kidnap macroeconomic policies and eventually force the use of an all-out stimulus”, especially since achieving the target will depend on how the pandemic pans out in the US and Europe. Interestingly, unlike the US$2trillion US bailout, China has held back on large cash bailouts so far.

…remember, pre-COVID, China wanted to build ecological civilisation; to become ‘Beautiful’

To discern where China is heading post-COVID, it pays to look at where they wanted to end up pre-COVID – a Beautiful China. Policies and actions in pre-COVID times point to rebalancing the economy and the environment toward an ecological civilization – see our reviews of NPC meetings for 2017, 2018 and 2019.

With nowhere for China to hedge risks, the only way forward is to rethink products. Not surprisingly, there is a surge in demand for China’s pharmaceuticals and manufactured home gym/medical equipment. But the textile industry has seen a contraction and there are signs that some manufacturers may not survive protracted contraction in demand beyond half a year – more here.

China may well bring forward its reforms & swallow the bitter pill of transition now …

With multiple carbon and water intensive and polluting industries at risk, will China bring forward its reforms and leverage this COVID downturn to swallow the bitter pill of transition and fast track to an ecologicial civilization?

The stars are aligned for such action in some industries. Take dirty and thirsty fast fashion – built on just-in-time manufacturing and low margins, it is especially vulnerable to COVID. Since the pandemic is accelerating its death, why not reimagine a new clean and circular fashion future instead? After all, let’s not forget that China has circular economy plans for textiles. It’s time to put this into action – do NOT bail out such industries – instead throw money at subsidizing true green fashion – check out our thoughts on the future of fast fashion here.

There may be big bailout but subsidies for green transformation instead … Premier Li says 2020 growth rate is not a big deal as long as jobs are stable

So fingers crossed for no bailouts for carbon & water intensive & polluting industries but subsidies for their transformation instead. At least China has just relaxed enforcement of some environmental targets rather than scrapping/ relaxing environmental regulations. Premier Li Keqiang’s words in mid-March are also encouraging – he said the 2020 growth rate is “not a big deal” as long as the job market is stable. Let’s wait and see.

Looper! It’s time to rewrite our story …

We are crap at managing something which is generally certain but specifically ambiguous …

…like the virus & climate change

Another hard truth is that this pandemic has made it glaringly clear that we are really crap at managing something which is generally certain but specifically ambiguous. COVID-19 and climate change both fall into this category – we know it WILL happen but exactly WHEN and precisely the magnitude of the impact is ambiguous. And we don’t like ambiguity – we need to know for certain how it will strike before we mobilise to mitigate/contain the crises.

We can’t help it, we are hardwired that way. We operate in “our loops”. But now is the time to question our norm so that we can define our new reality. Yet, many will be unwilling. Borrowing a quote from Westworld (a sci-fi TV series about how humans interact with AI “Hosts” in a theme park called Westworld) – “Humans fancy that there’s something special about the way we perceive the world, and yet we live in loops as tight and closed as the hosts do. Seldom questioning our choices, content for the most part to be told what to do next.”

Our current core programming is set on a self-destruct loop … so stop thinking about going back, it’s time to rewrite our stories

Stop thinking about going back to the norm – was it so great before? Were those things we were doing so important that we are willing sacrifice our planet, our children’s future? It’s time to take a long hard look at our core programming which is currently set to self-destructive mode. We need to reset this – it’s time to rewrite our stories.

The future of money is looking precarious + money laundering of a different kind

One of our greatest stories ever told according to Yuval Noah Harari is Money. “It has no objective value… but then you have these master storytellers: the big bankers, the finance ministers… and they come, and they tell a very convincing story”.

Even ‘money’ & banks, weren’t prepared for COVID – central banks overrode dividends and share buybacks

So how can they say they are prepared for climate change?

Well, it appears that even money was not prepared for the virus. Worried over capital adequacy, the Bank of England and European Central Bank issued orders to banks to freeze their dividends and share buybacks during COVID-19.  Our financial system is clearly not prepared – if dividend distribution was overridden by one pandemic that we knew was certain to happen, how can we say that we are prepared for climate change where we will face multiple outbreaks as well as physical disasters concurrently, or if we are lucky one after another.

Just focusing on carbon transition does not mean we are prepared for the impacts on multiple certain climate crises ahead. For an idea of how unprepared we are in Hong Kong click here.

On a side note, I can’t wait till we fully move to using e-money. I’m so tired of disinfecting my bank notes and coins – I can’t believe I am literally laundering money.

We think we are smart, but we are not that smart

Another story we tell ourselves is that we are smart. There’s no need to map out a 3°-5°C scenario because that’s understood to be disastrous for the world; instead let’s focus on the amount of money we can make by transitioning to a low-carbon economy so that businesses will voluntarily implement the transition to avoid a 3°-5°C world. We get told this a lot.

Without worst-case scenario COVID projections, we would not have stayed at home…

It kind of sounds sensible but then again this is like saying … everyone knows the virus can kill so let’s not bother doing any projections of new infections; just tell people to stay at home; wash their hands and practice social distancing – they will do all these voluntarily because they don’t want to die. And we all know how this is working out.

Basically, this strategy does not work. The UK (which we thought was quite intelligent) opted for herd immunity until they saw how badly the scenarios played out.

… so why would we transition if we can’t see how bad 3°-5°C looks?

Gaming out climate scenarios will push us to act – banks must lead otherwise our hard earned savings will be lost

The bottom line is that we must see the 3°-5°impact scenarios and how it threatens our homes, our business and our investments. We need to spend money to assess these threats – gaming these out will push us to act; to prepare. If governments are not doing it, banks must lead the way, otherwise our hard earned savings will be lost through gross negligence. The financial sector is acting but given the dangers lurking, it must act faster and we certainly must not be distracted. It’s time to admit, we are not invincible nor that intelligent.

Our future is not safe – we must flatten the climate curve with unicorns

None of our systems or institutions is ready. We need to flatten that climate curve now. What stories will be told of us at this time? Remember that time of the coronavirus … we used it to turn civilization away from even greater disasters from climate change. Or would history say … many people died from the virus, but yet we did not learn … so many more are still dying.

It’s time to face some hard truths – there’s no going back to the way we were if we want a future

Our future is not safe. Increasingly strong hurricanes, Australia & California burning, horrendous flooding in India, more frequent outbreaks are merely a glimpse of the horrors to come. It’s time to face some hard truths in these COVID times – there’s no going back to the way we were if we want a future. When searching for the truth, Westworld’s Maeve (a brothel madam Host) offers some good advice – “If you go looking for the truth, get the whole thing. It’s like a good f***. Half is worse than none at all.”

With this pandemic, we are presented with a once-in-a lifetime unicorn opportunity to reset – let’s not squander it.

Further Reading

  • COVID & Climate – Make Money Or Save Lives? – Governments are prioritising lives over money but with pressure to re-open the economy, can we use lessons learnt from COVID-19 to prepare for the climate crisis? CWR’s Ronald Leung explores the future of aviation and low oil prices
  • Fast Fashion’s COVID Death & Virtual Revival? – Fast fashion is dying – from broken supply chains and no demand thanks to WFH. CWR’s Dawn McGregor and Debra Tan reimagine fashion’s future – a virtual realm where our avatars attend Zoom drinks and digital supermodels walk the runway
  • Medical Wastewater Treatment In COVID Times – Coronavirus can be found in faeces & urine so medical wastewater has to be handled with care. China is taking the lead with new standards & regulations. CWR’s Zhenzhen Xu expands on the hidden battle fought to keep the virus out of water & sewage systems
  • Climate Fight: Finance As Asia’s Most Effective Weapon – Green finance is set to take off as regulations promote carbon pricing and better disclosure but Dr Ma and Huang also see gaps that need closing like integrating ESG factors in risk management
  • 5 Trends For The Year Of The Rat – Will the rat bring more outbreaks or will we get sunk like a drowned rat by water and climate risks? Or can we stay ahead with our wits and cunning to win the rat race? Find out what the lunar new year has in store for us in our 5 trends

More on Latest

  • Forward Osmosis Tech For Wastewater Reuse – Desalination is power hungry. Dr Xiaodong Wang from Qingdao University of Technology shares with us a hybrid forward & reverse osmosis system that can increase water recovery by 45%, cut energy use and even reuse wastewater
  • Raindrops To Energy: The Droplet-Based Electricity Generator – Water contains huge amounts of energy yet harvesting it is not efficient. We sat down with Prof. Zuankai Wang from the City University of HK to learn more about how this groundbreaking tech powers 100 LED bulbs with one drop of rain
Debra Tan
Author: Debra Tan
Debra heads the CWR team and has steered the CWR brand from idea to a leader in the water risk conversation globally. Reports she has written for and with financial institutions analyzing the impact of water risks on the Power, Mining, Agricultural and Textiles industries have been considered groundbreaking and instrumental in understanding not just China’s but future global water challenges. One of these led the fashion industry to nominate CWR as a finalist for the Global Leadership Awards in Sustainable Apparel; another is helping to build consensus toward water risk valuation. Debra is a prolific speaker on water risk delivering keynotes, participating in panel discussions at water prize seminars, numerous investor & industry conferences as well as G2G and academic forums. Before venturing into “water”, she worked in finance, spending over a decade as a chartered accountant and investment banker specializing in M&A and strategic advisory. Debra left banking to pursue her interest in photography and also ran and organized philanthropic and luxury holidays for a small but global private members travel network She has lived and worked in Beijing, HK, KL, London, New York and Singapore and spends her spare time exploring glaciers in Asia.
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