The Russian International Affairs Council published an interview with Alejandro Litovsky, CEO of the Earth Security, discussing the recently released 2015 Earth Security Index and his views on the future scenarios for how global sustainability risks will shape regional stability and international relations in many emerging economies.
The full interview has been reproduced below with permission.
"Among countless research papers on the energy problems in Europe, the recent report of the Earth Security Group stands out in at least two important respects. First, it approaches energy not as a separate object of analysis, but as a part of more general eco- and social systems in Europe and in its periphery. Second, it focuses not on the current energy wars between Russia and EU, but rather on the problem of defining long term sustainable solutions for energy problems in Western Eurasia. These two distinct features of the report make it refreshing and intellectually rewarding for anyone interested on out of the box thinking on energy matters."
Andrey Kortunov, Director General, Russian International Affairs Council
Recently Earth Security launched its annual Earth Security Index 2015 report which outlines the resource security risks that countries and multinational companies face from a deepening of economic and political inter-dependencies at regional and global levels. The report presents an innovative visual tool to assess how the complexity of sustainability pressures may evolve into country risks. It applies it to seven 'blueprints' of key global commodities focusing on a unique analysis and communication on the headline risks and opportunities that governments and the private sector can seize by cooperating to avert crises. Increasing sustainability is the key message of this report. The report is downloadable at the above hyperlink. Meanwhile the RIAC team asked Alejandro Litovsky, CEO of the Earth Security based in London, UK, to share his unique insights into the topic, the future scenarios for how global sustainability risks will shape regional stability and international relations in many emerging economies and what this means for governments and investors.
The Earth Security Index 2015 report compares and contrasts the situation of very different countries, from China to Brazil, and India to Turkey. What is the rationale for choosing them?
It is clear that sustainability pressures will shape 21st century geopolitics. Emerging economic powers have a vulnerability of resources and will need alliances to ensure their supply of food and energy, but also water that is embedded in those commodities. The report analyses key commodity markets from the perspective of the sustainability pressures undermining strategic producers and consumers. It maps their inter-dependencies and provides a view of the future escalation of the risks as sustainability pressures become more complex and acute.
We see the large emerging economies – the BRICS and MINT countries – as playing a pivotal role in global stability and sustainability. While they are exposed to resource-related pressures, at the same time these economies are growing and offering the opportunity to invest in business models, technologies and products that increase their resilience – from greater energy efficiency, to more sustainable infrastructure investments, financial products and especially food production. Growth in emerging markets should be seen as a huge opportunity for a sustainability transition, and it is a risk imperative for companies and governments to pay attention.
In the Earth Security Index, you pay a lot of attention to companies and governments. Does this necessarily mean that you have little faith in international frameworks and institutions?
This is a time of a gradual transition in international relations and the scale and urgency of global resource crises means there is no time to wait. We are moving from existing multilateral frameworks and international agreements to a context where emerging economies play a larger role in global governance. However, in the short and medium term regionalisation will also playing a big part, as emerging markets move to strengthen their immediate spheres of influence through trade, investment and political alliances. However, resource dependencies happen on a global scale – take the case of China's dependence on soybean supplies from South America. The pull between regional and global market forces will become more complex due to resource demands, and we see governments and companies, working thought bilateral and regional agreements as the big driver of change in his period of transition. Of course international institutions are very important, but today's global institutions will struggle to keep up in the immediate future and there really is not time to spare.
We at the group work primarily with the private sector as a driver of change. Companies, and in particular big multinational companies, are moving capital, technologies and skills over borders and building bridges across countries. More strategic investments can play a role in building sustainability, resilience and stability in this transition. Stability is key for business and investments, so this is where we see converging interests in a more sustainable future.
Companies and governments need to have a discussion on a more strategic level concerning the investment opportunities to scale solutions to energy, water and food challenges in a sustainable way. Today this discussion is not happening properly and we see the role of the Earth Security Index report as providing the framework, the ideas and the proposals for this public-private cooperation. This is the fundamental purpose of the report's blueprints. They show the risks but also the strategic opportunities for companies to make investment decisions in emerging markets that will help national governments cope with resource pressures.
What role do you see for such structures as the BRICS bank initiative, the Asian Infrastructure Investment Bank or the European Bank of Reconstruction and Development in this process?
I want to stress the growing role of infrastructure banks in this process. We are talking about energy, food or water needs, all of which require investments in infrastructure. However, you need the right type of sustainable investments and this is where infrastructure banks have a role to play -- but sustainable investment principles need to be much more at the core of their strategies. The Asian Infrastructure Investment Bank (AIIB) is a very interesting emerging player, one of those structures that are part of the global transition. However, in order for AIIB to present itself as a next-generation bank, besides the question of its governance structure, it should also embrace sustainable infrastructure investment as a core principle. I am afraid I am not seeing that at the moment in AIIB's discussions. Sustainability is critical to the future stability of China and Asia as a whole, and AIIB should emerge as the bank that will address this gap. This is the time for AIIB to think about these core strategic issues. Recently we have witnessed big European economies pledging their allegiance to the bank. A global and regional convergence is on the way. The AIIB and similar frameworks will be some of the critical elements in this process. OECD countries will join these emerging infrastructure players. But still, I don't see sustainability concerns at the centre of the discussions and this is a strategic mistake given the pressures gaining momentum in Asia. This is essential because the world the AIIB is going to inherit is one that is much more resource-constrained than that of Bretton Woods in 1945.
What are you planning to do next?
We are starting to work on the plans for the next Earth Security Index 2016. We see the report's role as providing the direction for aligning global capital with country and regional sustainability priorities. We are looking at three or four key investment sectors that are going to drive the infrastructure, energy, extractive technologies and agriculture sectors over the next decade. The main point is about the transition to more sustainable resource markets and how countries and international financial institutions, new and old, will contribute the capital that is needed.
We are cooperating with strategic networks and partners around the world and this is also going to be a key feature of the 2016 report. We are delighted to be collaborating with, for example, the Russian International Affairs Council, and RIAC's early input in the design of the blueprint on energy in Russia and Europe was very important. We are focusing our analysis and proposals on key industries, identifying the headline future risks but also the opportunities to make sustainable investments central to a global market strategy. This will necessarily require involving governments in the discussion. It is time that political agendas also focus on paving the way for a new wave of cross-border investments that create the sustainability and prosperity that we need.
Interviewed by Maria Gurova, RIAC web editor.
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