Some reflections on the war in Ukraine and its impact on green opportunities
The war in Ukraine is a tragedy for Ukrainian, Russians, Europeans, Africans and others. It is also a crisis that showed how sustainability and geopolitics are connected. In this article, we highlight some of the significant changes driven by both sustainability and geopolitics in the strategic sectors we cover. These should help businesses and investors understand where the world is going, adapt to the new realities and find the right green opportunities.
Change in four strategic sectors
In the last few years, climate change started to disrupt the global food supply. Russia and Ukraine account for a major share of the world’s agricultural markets. In the last year, the war in Ukraine made things worse. Fortunately, in the short term, the Black Sea Grain Initiative, an agreement between Ukraine and Russia made with Turkey and the UN mitigated the situation. And in the mid to long term, solutions for better agriculture – new technologies, management processes and more – developed by businesses big and small will be needed to restore a proper supply.
The EU used to import much of its energy from Russia. It has substantially reduced that in one year, establishing energy supplies from other countries. Unfortunately, this has been possible by increasing the usage of fossil fuels, including coal. This was necessary for the short term, but the EU remains committed to being climate-neutral by 2050. Many solutions already exist to start the transition, and many are being developed to accelerate it later. In addition, the US signed into law the Inflation Reduction Act, which allocates $370 billion for clean energy.
The war got consumers to rethink what car to drive. Carmakers around the world are increasingly focusing on their electric vehicle (EVs) offerings. Global EV sales continued strongly in 2022. A total of $10,5 million of new Battery Electric Vehicles (BEV) and Plug-In Hybrids (PHEVs) were delivered during 2022, an increase of +55 % compared to 2021. (The share of BEV in 2022 was 73% of the EV total, up from 71% in 2021.) Opportunities are not only in EVs but also in charge points, batteries, fuel cells (hydrogen), shared mobility, connected autonomous cars and more.
Investors will increasingly facilitate and support the food, energy, mobility and other changes required to adjust to the new world – regionalised and multipolar – via Environmental, Social and Governance (ESG) factors and other mechanisms. Regulators are already playing their part – the Sustainable Finance Disclosure Regulation (SFDR), an EU regulation introduced to make it easier to compare green investments and disincentivise greenwashing. It is for the EU, but it is likely to have a global impact. And then there is Green Fintech – investors poured $2.9bn into it globally in 2022.
Nuclear end risk
The options for ending the war include negotiations, a regime change in Russia, a collapse of Russia or a nuclear war. The probability of a nuclear end remains small but worryingly continues to increase. After one year of war in Ukraine, no side seems willing to negotiate. In fact, the war is escalating with the support of the Russian people (which is understandable).
So far, weapons from the West helped Ukraine but economic, financial and technological sanctions against Russia did not help much. Maybe they will do more later. Or maybe they will not – around 85% of the world’s population does not support them.
In addition, although Russians can no longer buy the latest iPhone and Russian organisations can no longer buy high-end tech, the Russian military does not need today’s Western tech to launch a nuclear attack.
Last year was a strong one for global climate tech, despite the clash of sustainability and geopolitics. Climate tech businesses brought in over $70 billion in 2022, surpassing 2021’s figure of $37 billion. The US got the largest share, followed by the EU, China and India.
The recent failures of Silvergate, SVB and Signature in the US and Credit Suisse in Europe as well as banking problems in China are refocusing the world on financial markets. I hope that this, especially if it gets worse, will at least prompt the West and China to push for negotiations between Russia and Ukraine to start sooner rather than later.
(Working assumptions – the West and China depend on each other and stable markets. And their politicians, despite tensions, have no desire to fully destroy the current world order with a nuclear war. While the Russian and Ukrainian ones are willing to risk anything.)
My experience at UBS Investment Bank in 2007 & 2008 and what I have seen in finance since are telling me that markets will get worse before they get better.
Considering both sustainability and geopolitics, P27 soft-launched the Green Business Marketplace, a free-to-list platform where businesses in the sectors above can find solutions to transition to a greener economy. To learn more and list: