APLANET » Sustainability at the EBRD

Sustainability at the EBRD

by APLANET, APLANET

Jul 19, 2022

About this ATalk

Adonai Herrera-Martínez, Director for Environment and Sustainability at the European Bank for Reconstruction and Development (EBRD) is the guest speaker in this episode of ATalk.

Adonai shares his insights on how finance is growing to include both biodiversity and nature, EBRD commitments on green energy/ projects & their policy of economic inclusion, the outward-looking nature of the EBRD and how the combination of environmental, societal and governance considerations are vital to achieve a green transition.

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Transcript

James Peduzzi, ESG Analyst at APlanet, interviewed Adonai Herrera-Martínez for this ATalk. You can find the full transcript of their conversation below.

James Peduzzi:Welcome Adonai. Thank you so much for your time today. I just wanted to get started by understanding what your role is, what it entails and what you are looking at the moment.
Adonai:Thanks a lot for the invitation to speak this morning. It’s a pleasure to basically explain what we do on environment and sustainability at the European bank for reconstruction and development, the EBRD. As you said, I’m the director of the Environment and Sustainability Department, and our role is threefold. 

First of all, my department is in charge of the environmental social oversight, the application of the Environmental Social Policy (ESP) in all the projects that we finance, making sure that our projects are in line with the standards we require, from health and safety to labour rights, to biodiversity protection, cultural heritage, stakeholder engagement to name, just a few. We have 10 performance requirements. 
The second role, we are accountable for the green finance attribution of the bank. That is, we make sure that, whenever we identify green projects, we make sure that those projects are truly green and are truly delivered. So in a way we keep the bank true to its green commitments from climate action to environmental investments.

And the third role that is emerging more and more is to shape and drive the strategy for biodiversity and nature in our activities, try to mainstream nature in what we do. Which is the new plan. So those are the three things that we are responsible for, we’re trying to do.
James:Sure. And we’ll talk a bit later on nature and biodiversity. It’s a really interesting space there. You mentioned the commitments – would you mind giving just a brief overview of the commitments that you do have at the EBRD?
Adonai:Yes, absolutely. Well look, in line with investing in clean energy and, in green projects for many years, actually since, since our inception, in fact, if you look at the article established in the bank, the agreement established in the bank, article two, mandates and calls for EBRD to mainstream nature, and ecosystem protection and environmental finance in all its activities.

So, the environment has been at the core of the EBRD’s mandates, since it was created in 1991. Since 2006 we have had an approach and initiative to scale up, especially clean energy back in the day, but also green investments. As recent as last year, we approved a new strategy.

The green economic strategy approach it’s called, actually, setting and new goals for green finance. Last year we financed almost 50% of our financial flows to green projects. And that is the goal we set up in 2021 to 2025. So basically our goals are twofold: to finance at least 50% of our flows continuously on green projects, but also to make sure that a 100% of our projects will be aligned with the objectives of the Paris agreement.

Typically, If you’re familiar with the EU Taxonomy, I typically get explained these by Paris alignment is a ‘do no significant harm’ approach that is making sure that our financial flows, our projects do not undermine the objectives, the mitigation adaptation objectives of the Paris agreement and the green finance goal of 50% is actually making sure that those flows substantially contribute and accelerate the decarbonization and the deployment of green green projects across original operations.
James:Right. Understood. So is it, am I right in thinking that instead of doing no harm, it’s actually doing good on top of it.
Adonai:You have between quotes “do no harm” that is making sure that a hundred percent of our projects are in line with the decarbonization strategies of different projects.

And on top of that, at least 50% should accelerate that decarbonisation or contribute to the environmental transformation of our economies. Because bear in mind, it’s not just climate action. It’s also about environmental investments. If you’re familiar with the EU taxonomy, there are six environmental objectives.

Two of them are climate related mitigation, climate change, mitigation adaptation, but there are other four objectives that are at the core of our ecological transformation: pollution prevention, biodiversity protection, sustainable use of water and marine resources and the circular economy.
So those are what we call environmental finance, right. Not necessarily directly linked to climate, but with obvious climate co-benefits as well. 
James:So in your role what are some of the challenges that you face?
Adonai:Well, this is a good question. Let me give you the flip side of that.

We are at the verge of an ecological transformation. Right now, we see investors obtaining better economic returns by investing in green energy rather than conventional, fossil fuel generation. So the economic drivers to drive that economic transformation are there.

And sustainability now beyond energy has permeated in all, in all sectors from manufacturing to transport, to agriculture, you have a clear push, to decarbonization in all those sectors. Think about it, I mentioned that the taxonomy is very detailed, especially the technical annexes are extremely detailed benchmarks. And that is becoming the rule book on which companies are investing in order to be considered sustainable. And that covers absolutely all sectors.

This drive to decarbonize, the economics returns are there, the technical benchmarks are there: but it is true that what we face right now with the energy crisis, with the war in Ukraine, we face a rather complex geopolitical conflict.

And that has had direct impacts on increased energy prices, inflation, more than likely the risk of recession and possible interest rate increases. To a certain extent, because if we enter into our recession, that will be quite limited. So it is true that we are a bit constrained and that more green momentum means transformation, momentum that we had until now might slow down due to energy security constraints. Yet, I think it’s also well understood that in the medium-long term, this kind of complex global macroeconomic context will help accelerate the green transformation. Why? Because especially Europe, central Europe and Europe in general will need to diversify its energy sources, away from gas, away from Russian gas.

Away from fossil fuels in general. So I believe that will push forward that transformation, not just in the power sector, but also in other sectors, as I said before. A key to the decarbonisation of our economies is the electrification of the different sectors in the real economy.
So that electrification will drive new investments in renewables, but we will also drive alternative vectors of energy that are sustainable, like green hydrogen, production of green hydrogen through electrolyzers that are driven by renewable energy. And that is key to the decarbonization of how to abate industries such as cement and such as steel, for example.

And the third area that I see that will require focus in order to promote that green transformation is the accelerated shutdown and decommissioning of obsolete, and amortise, fossil fuel plants. Because typically in Europe, the ETS is a very good mechanism to internalise environmental externalities, but outside Europe, that’s not so much the case.

So I think it’s key to promote and to incentivize that decommissioning of outdated plants outside Europe in order to actually create more room for new investments in renewables. And I think we’ll discuss probably later the role of the power sector in the overall economy.
But these three things will be key. The electrification of processes, the production of green hydrogen, the accelerated decommissioning of outdated fossil fuel plants. 
James:That’s really interesting. And I was also wondering about your thoughts on looking to nuclear energy? I know it can be a bit of a tricky subject, but, in a sense it’s renewable, but then we’ve got a lot of waste that comes from it. Am I right in thinking you did your PhD on looking at a sustainable way to deal with nuclear waste? So perhaps I could get your thoughts on that there?
Adonai:It is a complex topic as well. I mean and my thoughts – what I’ll share with you is my personal opinion. I mean, it’s not that by no means is the reflection of what the EBRD thinks , the EBRD is actually quite neutral. We don’t finance it directly, but finance nuclear safety.

I think nuclear has a role for the moment, to maintain its output. I don’t see the likelihood of nuclear revival that some kind of players in the industry might see. most of all, because the economic drivers to invest in renewals are there already, there’s no point in investing in a technology that indeed is carbon free, but has huge overnight costs.

The cost of energy is low, but even not competitive with renewables and takes decades to develop. so I think the economic rationale to invest in nuclear might not be there in my humble opinion. Existing plants have a role in keeping generating energy, especially during the current energy crisis or constraints.

But in my humble opinion the future of new nuclear power is limited to the next decade or two. Renewables are just far too competitive, you know? Economically competitive. and once the generation of green hydrogen achieves learning curves that makes Green hydrogen an alternative, the combination of both will sort out storage, will sort out management of the grid, will sort out the decarbonisation of hard to abate industries. That combination will be just very powerful and hopefully will be able to use the existing gas infrastructure to actually transport hydrogen as well.

 the use of blended fuel. So, I think we are at the verge of a true green economic transformation, thanks to the combination of those factors. So nuclear is in a way I believe is a bit of a think of the past. I am fascinated by the sector and the issue of dealing with nuclear waste is still very prevalent.
I personally think that Secular repositories are not the solution because radioactive waste would be active for 10,000 tens of thousands of years. So I think we need to look for technical solutions that actually reduce the radioactivity of those wastes, but as a solution to climate change and the energy crisis, I think it’s relatively short term.
James:And it’s interesting that you mentioned the economic return on renewable energy, because that is so important. I think the profitability in a sense is a sustainability thing for a business in that if a business is going to carry on being sustainable, for the environment, then it needs to be profitable, it needs to be living, it needs to be alive. so it’s definitely a really important point in that. And I’m relieved to hear that renewable energy does have such economic return and can be relied on in the future.
Adonai:Yes, absolutely. You just need to, you just need to look at the latest numbers of the auction for wind and solar across the world from Chile to Saudi Arabia to across Europe, I mean the bids that investors, the bids that won investors provided are. Our record low, we’re talking about less than two, a dollar cents per kilowatt hour. That’s completely unbeatable. Compared to other costs, even of more established, (I wouldn’t say even say any more established technologies because renewals is extremely established, especially solar and wind).

So I think the big question mark is the licensing and the identification of new sites for new massive, large-scale installed capacity, at the transport and the interconnection of both, how high power lines as well as, green hydrogen as energy vectors generated from those renewables.
James:I know that the, EBRD has a lot of green finance commitments towards the energy sector, as one of the major ones, as well as other sectors. So perhaps, you can mention a bit more on why the energy sector is so important. And then what you’re looking at in these other sectors that have these, green finance commitments.
Adonai:As I said before, the power sector is essential. First of all for achieving low carbon economies, first of all, because traditionally the power sector has been the main source of CO2 emissions across the world right now, as I said before, if you look at IRENA numbers in 2020-21, about 80% of the new install capacity was renewable.

So we’re Well ahead in those steps towards the green transformation of the power sector, right? They expect also by 2026, that percentage to be 95%. So the vast majority of new install capacity will be renewable, which shows how profitable investments are, because these would not happen if they were not profitable. 

But the power sector now it’s still at par in terms of CO2 emissions with other sectors, like, transport, like industry but it’s also very important. It’s key for the decarbonization of other sectors as well. And I mentioned it before, in order to decarbonize transport, you need to electrify.

And, so, electric cars being driven by coal fired electricity, do not decarbonize, in fact they need more CO2 per kilometre passenger delivered. So decarbonizing, electrifying, different economic activities and decarbonizing the power sector will be key to the decarbonization.
James:Yes. it’s really at the base of it, isn’t it?
Adonai:Exactly. And as I said before, for industries that cannot clearly be electrified where you need very intense sources of heat. For example, cement production and steel industry, some manufacturing of other products, also clean electricity will be key to generating other vectors to produce that heat. 

And I’m thinking, as I said before, the green hydrogen. Two little examples that are quite, quite exciting, quite interesting: the production of green steel recently SSAB, this Swedish steel company produced the first batch of green steel. Steel produced fully with green hydrogen and they sold it to Volvo to produce the first batch of net zero cars
James:as in truly net zero in the, they were electric as well as green steel?
Adonai:Yes, exactly. Well, that’s the way forward in a way. I mean, I’m sure the Swedish government and the SSAB are very much proud of this feat because that’s a trailblazer of what should be, not just the automotive industry, but all industries that traditionally have been very carbon intensive, very energy intensive and [that have emissions] considered hard to abate. So, that’s a very good example.

Another good example of two projects that we are considering right now that are very exciting and might actually be the stars in the upcoming COP 27 in Egypt, we’re considering both in Kazakhstan and in Egypt, the production of green ammonia through hydrogen electrolyzers that are driven by a  renewable energy plant.

So we’ll finance the renewals, the same companies developing the renewables, solar and wind, the electrolyzers and the production of ammonia. So basically we prefer to be integrated across the supply chain of green fertilisers now. So that’s an exciting project, which just, again, embodies the transformation, the green, low carbon transformation of a sector that has been traditionally considered hard to abate. And we know that the food sector is the source of about 40% of electricity from cradle to grave, from field to actual use. So basically decarbonizing the production of fertilisers will be a major feat in decarbonizing the agricultural sector as well.
James:It’s definitely an interesting space. And there’s a lot of opportunity for development now, which is exciting to see. I wanted to switch tack a little bit, I was reading that, there’s a lot of investment from the EBRD to, I think you work across three continents.

Am I right? Asia, Africa and Europe, obviously. It seems that the EBRD has very much an outward looking approach. What is the value of that when it comes to sustainability? 
Adonai:Yes. Well we work from Morocco to Mongolia and from Estonia to Egypt. And, and in fact, it’s interesting that you mentioned this because in our latest annual meeting that took place in Marrakesh last May our shareholders agreed in principle to a progressive expansion to Sub-Saharan Africa, a progressive and selective expansion to Sub-Saharan Africa. So our region will expand and hopefully we’ll be able to actually translate and transpose that experience we had in helping economies achieve their full potential into a new region.
And your question is very pertinent. Why? Because part of our added value is to help the cross fertilisation between countries and regions and sectors. Let me tell you how we operate a bit. We combine investments in projects.

We are a project finance bank and our driver is to operate bankably even though we’re a developing institution. And we are publicly owned by 73 countries. We need to get financial returns on our investments. So, one of our three pillars is bankability; the other two are transition impact and additionality. We need to make sure that we get the financial returns in our investments. Another pillar is technical assistance to clients. And the third one is policy dialogue with governments.

So when we launch policy activities in one country, if those are successful to accelerate the transformation of an economy, and in this case, we’re talking about the green transformation, that’s my field. There’s other five transition qualities, competitiveness, governance, integration, and inclusion. I am focused on a green transformation. So when we realise that a policy dialogue and activity has been very effective in accelerated transformation, such as for example, a support to renewable energy auctions in Jordan, in Egypt, etc. We then transpose that and adapt it to other economies, to other countries where we operate. That cross fertilisation is extremely effective in testing and finding drivers for success. Another added value is we help companies in our countries invest in other countries where we operate.

I know Turkey very well. I spent seven years there covering the green economy in that country. It is a country I hold very dear. We’ve helped many Turkish companies invest in Western Balkans, in North Africa, or in central Asia. Good example of that is our work with TAV, a Turkish airport operator where we helped them invest in Georgia. And they’re now managing the Tbilisi and the Batumi airport to very, very high standards. So yes that cross fertilisation is a trademark of the institution.
James:And it seems like it’s beneficial for both parties, isn’t it? Because you learn from each other and the environment benefits at the same time.
Adonai:Of course.
James:And you also work with other multilateral development banks. Beyond these areas that you’ve mentioned. What’s the importance of that as well?
Adonai:Well, actually working with other multilaterals is extremely important because we find a common front to the issues we are trying to collectively tackle.

A good example of that is the work we are doing currently on defining, we as multilaterals we committed to align our financial flows to the objectives of the Paris agreement a couple of years ago. And we’ve been working with the other multilaterals to develop the methodologies that rigorously and credibly will drive that in line. Each one of us has been trying to carry out, defining the methodologies, methodologies that are very much related to the context where we operate.

For example, the EIB, I think is undoubtedly, they have been at the leading front of the alignment, they developed their climate strategy, very early on. They’ve taken a very principled approach where they stop financing, some sectors that were, that could have been challenged, like road sectors, airport sectors, but bear in mind, IEB 90% of its investments lie in the EU countries. Whereas we invest most of our money outside the EU.

So, in order to deliver our transition mandate, we have to be a little bit more nuanced with sectors that could be controversial like roads or airports. And for that, we have spent a little bit more time developing the Paris Alignment Methodology that is now going fully public.

And, we’ve received very positive feedback from the different stakeholders and civil society or organisations with which we share that Paris Alignment Methodology. But again, that work has been done in parallel with the other MDBs, where we had very creative, and very lively exchanges of ideas and of points of view.

And that’s very, very important because ultimately what we do as a front, as MDBs then permeates on our clients, but also on the financial institutions – I’m talking about direct clients that developed projects – with whom we work in our countries that are the conveyor belt of the financial support to the real economic activities.
James:And using that as like a launch pad, I want to talk about nature, agriculture and things like that. It’s something that you’re very much working on at the moment, I understand. And you’re very passionate about it. I myself have taken great interest in what the Taskforce for Nature related Financial Disclosures is doing – the TNFD – and I understand that the EBRD has been working with them, with that Task force since 2019.

So I wanted to ask what is the importance of protecting nature for the environment as well as for our economies and societies, and then what work have you done with the TNFD and what can we expect in the coming months and years?
Adonai:Yes. Well, look, I’m very passionate about nature, not just because family wise I’m the son of a biologist, but because nature is everything. You, we, depend on nature, right? Nature provides the services, the goods that are basic for life, from clean air, water, and soil to underpinning the living natural resources that drive all our economic activities.

So we need nature to live, but on the other hand, those are global commons. They are typically not prized. And, so they’re taken for free, the services that nature provides. And on top of that very, very often, The negative externalities of eroding those ecosystem services are not prized and are not internalised into our activities.

So basically what the economists know as, as a tragedy of the commons, right? So these are market failures that need to be addressed. And that’s one of the main goals of the Taskforce for nature related financial disclosure to make sure that those market failures, And those externalities are actually internalising the assessment of nature related risks in the economic activities that financial institutions support.

So basically what the TNFD is doing is replicating the work on climate, that the TCFD taskforce for climate related financial disclosures and, in a arguably much more complex, landscape. because basically all impacts of climate fall into one, key performance indicator, which is CO2 emissions.

Whereas nature has multiple performance indicators. They are strongly localised and they depend very much on the local baseline, right? So assessing nature related impacts is orders of magnitude more complex.
James:They’re hard to quantify aren’t they? I went to the Economist Sustainability Week on online webinars and they said this as well: it’s really hard to quantify. And as well, what they mentioned was the importance of agreeing on the language that we use in this sphere of nature within sustainability.
Adonai:No, that’s right. It’s an incredibly complex topic, but the fact that it’s so incredibly complex doesn’t mean that we shouldn’t act on it. We always speak about the climate crisis, right? But the climate crisis is a facet, a portion of the biodiversity and nature crisis that we are undergoing.

I mean, we’re talking about deforestation in the main lungs of the world, like the Amazon, the Congo basin, we’re talking about the issue of ocean plastic pollution, etc. That’s, that’s a broader picture issue, right? That reflects the depletion and the destruction of the ecosystems around the world that have climatic impacts, but also, impacts on livelihood of people on almost unrecoverable impacts on existing ecosystems.

The loss of biodiversity for example, is a major problem that is difficult to resolve once it has disappeared, right? So it’s extremely important. We are working with the TNFD and the TNFD forum. The TNFD’s main goal is to work with the private sector.

So all the MDBs, we are part of the forum but we keep a bit of distance just to let the private sector drive the overall conclusions. Of course we collaborate. Combining both questions together, you asked me about the importance of collaborating with the MDBs as well and the importance of nature.

I’m sure you’re familiar with the joining MDB statement of nature, people and planet that the MDBs issued in the cop 26 in Glasgow last year. Yes, my team was the driving force behind our engagement with the other MDBs. We contributed to the final language and that joint statement is a very useful document because it provides a framework of work for MDBs to mainstream nature in its operations. It divides actions into five areas:

(1) Leadership: commiting to our commitments, focus on maintaining leadership, on protective measures that is on environmental social policies, (2) Scaling up nature positive activities (and that’s an important point that we can discuss about later)
(3) Valuing nature: developing natural capital evaluation methodologies and integrating those in assessing nature related risk. That is nature risks that also entail financial risks.
(4) Creating synergies. That’s something that we are trying to do with the other MDBs, but also working with other stakeholders. For example, we’re trying to replicate the work we did in the Baltic sea, de-polluting the Baltic sea to the Mediterranean as well.
(5) Providing better, and broader biodiversity data and better disclosure.

So we are working on those five areas jointly, as MDBs, but separately as well. Trying to devise our strategies and our activities in those five areas. The second point of nature positive investments, is quite interesting. Because what is nature positive?

We’re trying to define what would be reasonable to define as nature positive. For an institution like us we are private sector focused. We don’t typically directly finance national parks or, rarely we finance, municipal investments, towards parks. We have a couple of investments there, but our driver and mandate is to operate bankably and those projects are rare. 

But where I see the great opportunity, not just myself, but our colleagues from other MDBs see the opportunities is to actually transform great investments, investments that had no relation to nature by applying our environmental social policy and applying the principle of net gains, transforming the do no harm principle to nature and biodiversity, into compensating well in excess and achieving net environmental gains in those projects that have a potential.

Think about roads that cut across degraded land, where that degraded land could be recovered, or a mine that compensates for the impact on an ecosystem, but compensates so much that it recuperates the ecosystems around it.

So that’s what we want to see. We are trying to pilot that concept in a couple of projects, for example, solid waste management in Serbia, where we are closing down an open dump. We are relandscaping that open dump that is providing a nature positive impact on that area as well as providing circular economy investments for the new management of solid waste. 

So that’s where I see the huge potential: making sure that we consider all our investments. And we always think, what could we do to take back nature and recuperate degraded ecosystems around our investments.
James:That’s really interesting. And that also links with what I wanted to talk about as well was, the blue economy and protecting our oceans. I think you were recently at conferences on this topic. And it very much links to what we’re talking about nature and making sure that we have a net positive effect on the environment and nature. So perhaps you could talk a little bit about the importance of the blue economy and protecting our oceans as well?
Adonai:Yes. Just, just by chance two days ago, I was in Barcelona at a blue finance conference, organised by the Union for the Mediterranean partner institution who we work with, quite a lot. Coming from Valencia, coming from the shore of the Mediterranean, I would be passionate about the topic. And of course this is an important topic for the institution.

It’s interesting because we started thinking about the blue economy systematically when we were invited by our colleagues from the European commission from EIB and WWF and UNEP FI to become a signatory of the blue economy finance principles. And we did become signatories in December 2020.

But it was interesting because when we started considering this, we thought, what have we done regarding the Blue economy? And we realised that we’ve done much more than met the eye back in the day. Looking at our numbers and since the creation of the bank we’ve invested more than 7 billion euros in blue economy projects, for a total project value of more than 20 billion euros.

Obviously, given the nature of our region, these were investments on, for example, wastewater treatment, solid waste management in coastal areas, sustainable property and tourism, ports and maritime transport and the decarbonisation of transport. So basically these were projects that were mostly geared towards the reversal of the environmental damage that occurred in coastal areas.

And I think arguably the most relevant paradigmatic example of the blue economy might be the work we did in the Baltic and the Barents Seas through the Northern dimension of our environmental partnership. It was a partnership especially driven by the governor of Finland in 2001, to actually reverse the damage of the Baltic and the Barents Seas.

The vast majority of the Baltic Sea, I think 98% has suffered eutrophication problems. The excessive amount of organic content and nutrients, phosphate and nitrates flowing into the Baltic Sea due to economic activity actually creates an algae bloom every year, including the creation and the growth of cyanobacteria bacteria that are poisonous as well and that actually wipes out full ecosystems and kills all life underneath because the absorption of oxygen basically chokes them. And it’s interesting because this is what happened as recently as last year in both sides of the Mediterranean: in the Mar Menor in Spain and in the Marmara Sea at the same time. 

The excessive flow of fertilisers created a huge amount of algae bloom that has killed the ecosystems in those areas. So in the Baltic, the governor of Finland led the creation of this partnership, created the Helsinki convention that watches over the state of the Baltic. And over the last 20 years, the mobilisation of 200 million euros yielded 1.3 billion euros in investment – mostly wastewater treatment plants, mostly around the Gulf of Finland and Kaliningrad – actually has reversed environmental damage, especially in the St Petersburg area.

Think that, in the nineties, less than 50% of the water was treated there. Now 98% of the wastewater is being treated there. And if you look at satellite photographs of the Baltic while eutrophication is taking place, the Gulf of Finland is faring quite well compared to other areas. Phosphorus and nitrogen levels declined 60% and 20% respectively.
And recently we launched an external impact assessment. Hellcom has confirmed that fish stocks, white tail eagles, and seals are coming back to the Gulf of Finland. so that pollution prevention, and then, Environmental damage reversal has had a direct impact on key biodiversity indicators in that ecosystem.

That is very important. And that’s why I’m so passionate and so keen to actually replicate that positive experience in the Baltic in other areas. And right now we’re working (that was another reason why I went to Barcelona) with the Union for the Mediterranean, the EIB, the KFW in replicating that Baltic experience into the Mediterranean.

Yes, we’re trying to propose to the commission and to other donors, to Sweden, Spain, France, Germany, Italy as well, the creation of a blue Mediterranean partnership, replicating that good experience. Why? To promote the blue economy in this area that, if the Baltic is home of 90 million people, the Mediterranean is home for 450 million people.

A lot of livelihoods depend on the health of the sea. So the idea is to reverse the damage that this sea has been undergoing. 
James:And it comes back to what we were saying about the importance of nature, as underpinning economic activity, and just society in general as well. I don’t think the importance can be understated.
Adonai:You are absolutely right. Just think about the economic returns that we, Mediterranean countries, are obtaining from tourism revenues. Just from tourism.

That would not be there. If the asset, if the Mediterranean was not kept in a decent shape in terms of pollution prevention. So it seems like tourism, just tourism justifies any action. Not to refer to aquaculture, to the need for water, the cost of water for, desalination, etc.

So just fixating on tourism would justify any action to keep that environmental asset that ecosystem in pristine conditions.
James:It seems like such a no brainer. I really support this, this new project.
Adonai:Yes, exactly. Yet there are market failures that stop the accelerated deployment of infrastructure – these are expensive projects, but there are also regulatory failures and regulatory imbalances between countries, between regions – that actually prevent the acceleration of investments in that.

Think of aquaculture as well. Sustainable Aquaculture. It is a very effective way of replenishing fish stocks and making sure that ecosystems are recuperated. Especially fish.. yet the sector is now blooming in the Northern Mediterranean, but it is almost nonexistent in the Southern Mediterranean.

So that’s a sector that needs to be supported. And there are clear market and economic gaps that are actually hindering the deployment of that economic activity in a sustainable manner in the south. So we need to actually help address those gaps and make sure that we create an environment for our economies to accelerate the development of those sustainable sectors.
James:Exactly. I think we’re running out of time here. I did want to ask you about the social, the “S” in ESG. but I don’t sure that we have time. I did want to get your thoughts on whether you are optimistic about the future. It sounds like you are.
Adonai:We need to respond quickly because yes, you’re absolutely right – We’re running out of time.

E, S, and G are all interlinked. You cannot achieve environmental sustainability if you don’t address the social needs of people. If you don’t implement the proper labour health and safety standards to maintain appropriate working conditions. If you don’t provide local communities sustainable means of maintaining their livelihoods. So just as reflected in the joint MDB statement, we need to make sure we protect the environment, and manage  sustainably our living natural resources, but we do it also for the benefit of society and then for the benefit of the most vulnerable groups.

So that’s completely interlinked and unavoidable. And if you can think about the just transition program for the energy transformation, where we are compensating local communities that produce coal, the same principle must apply to ecological transformation where we are protecting our ecosystems. What to do with fishermen, what to do with people whose economic activities are actually challenging environmental sustainability.

And the G is also essential. Why ESG and ESG standards are coming under fire quite a bit now? Because of the imbalance of disclosure standards and the unclear methodologies that are applying.

So we need to make sure that we level the playing field and all ESG reporting is set to common standards. And I was reading some articles the other day from some researchers about the challenges of standard ESG standards about the asymmetry of ESG rating and true environmental performance. We need to make sure that ESG ratings are transparent and they truly reflect not just future commitments, but environmental, social, and governance performance of companies right now.
So that is very, very important. But you, you were asking if I am optimistic and certainly I am. We need to be right? There’s a quote that I often remember when I face adversity from a Spanish philosopher writer, Miguel de Unamuno: “only one who attempts the absurd is capable of achieving the impossible.”

I keep telling myself this and we ought to attempt the absurd. Why? Because there’s no other alternative. Your company’s called APlanet, right? There’s no planet B. So we need to be optimistic – there’s no other solution.
James:I completely agree. Well, I think that’s all we’ve got time for today. I’d love to pick your brain even more, but, thank you so much for your time.
Adonai:Well thank you, James. It’s been a pleasure to talk to you. Thank you very much.

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