Month: May 2021

By Hendrik Troskie

Early in 2020, when I released my book The 4^th Competitive Force For Good, I reference the losses to the global economy as a result of cybersecurity events to reach some 6 trillion USD by 2024. It is a year later, and those figures have been blown out of the water. Cybersecurity Ventures now predict annual losses to the global economy reaching 11.5 trillion dollars by 2025.

Let’s reflect on that for a second. 11.5 trillion dollars is the same as the annual economic output of Japan, Germany and the UK combined. It is rapidly approaching the economic output of the second largest economy in the work: China. That’s right. Think of the blood sweat and tears of billions of hard-working people just squandered, every year. Now think about what the world can do to address the UN 17 goals for sustainable living, or addressing global poverty around the world with that amount of money every year.

In the last few months the cybersecurity world was rocked by two significant cyberattacks. The first is the SolarWinds cyberattack. It was initially described as a sophisticated attack by government sponsored attackers. In fact, it has been claimed that some 1,000 professional hackers were involved in perpetrating the attack. The consequences are far reaching: some nine US state departments have been identified as having suffered a breach, more than 18,000 business have been compromised. Big names like Microsoft admitted that their source code was accessed. Precisely what they mean by accessed is not clear. I think we can safely assume that the source code has been transferred out of the company. The worrying thing is that having access to the source code is the holy grail for hackers.  It gives attackers unprecedented abilities to develop software that exploits vulnerabilities in this code.

Another notable victim is the company FireEye/Mandiant. The global leader in attacker detection and response technology and services. Ironic? Indeed, but it is what was revealed that is more important than the attack itself. FireEye admitted that their own attack exploit software was accessed and copied. They promptly published details of the software plus mitigating strategies to prevent companies becoming victims of FireEyes attack tools. To much applause it must be added.

Now think of these attack tools as digital weapons. Why does FireEye have an arsenal of digital weapons? FireEye and many cybersecurity companies use digital weapons to test the effectiveness and efficiency of businesses to detect and respond to attacks on their networks. It is called red teaming or sometimes simulates targeted attack and respond assessments. This of course raises a number of important questions?

FireEye immediate informed their customer base on how to mitigate against the stolen digital assets and received a lot of praise for doing so. If we reflect for a second, we must ask the question. FireEye is in the business of providing detect and respond tools and services. So why did they have to inform their clients on how to mitigate against their digital weapons? Surely their customers should by subscription to FireEye have been resilient against these very weapons! The answer is that FireEye and other cybersecurity companies are in it for the profit. When they execute a simulated attack or red teaming exercise they must be successful in breaching the customers network. In order to do so cybersecurity companies stockpile digital weapons built to exploit vulnerabilities in technologies we all rely on. The right thing to do will be to inform the original manufacturer of the vulnerability, but that will disable the digital weapon. Some cybersecurity companies even boast about having exploit development teams, researchers that specifically stockpile vulnerabilities and digital weapons to guarantee their success in simulated targeted attacks. It raises serious ethical questions about the honesty and transparency in the cybersecurity industry.

The problem extends to beyond cybersecurity companies. Governments do the same. In fact, the US government have a stated policy towards stockpiling digital weapons in the ‘National Interest’. Under the Obama administration some form of control was implemented to limit the extend of the digital weapon stockpiling, but this control was abandoned by the Trump administration. Notably this is matter of public knowledge. It is not a secret. Most people I talk to seems to think it is justified under the idea of the national interest. Nevertheless, every now and again the government will inform a technology company of a vulnerability, but only once they have used their digital weapon and it has been exposed. Once the genie is out of the bottle it spreads around cybercriminal organisations like wildfire. The very recent attack on Microsoft Exchange server is an illustration in point. Some 250,000 business have been breached and there is a mad scramble to eliminate attackers form email systems whilst trying to maintain normal business activity. In the meantime, more attackers have joined the feast.

I predicted this problem in my book. In fact, let me be transparent and say that the control system that business and governments use to manage cybersecurity has predicted this problem as it has a negative feedback loop by design that will continue to expand the control gap to the point where control of information technology is lost. It is hard to look at recent cyberattacks, the growing losses of the global economy and not to think it has already happened. If the world economy is leaking away the economic output approaching that of the second biggest economy in the world, China, to cyberattacks, can we claim that we have cybersecurity under control? I suggest we cannot.

There is no point in trying to fix the problem with the cybersecurity control system as its stands. That is because the cybersecurity control system is the problem. It is time to rethink this solution, to stand back and ask ourselves the question, why are we doing cybersecurity control systems this way? It clearly does not work. How can we do this better? I have proposed an alternative in The 4^th Competitive Force For Good. It is an alternative to thinking about business leadership, ethics in business and purpose that has already proved highly efficient and effective in addressing sustainability problems and the environmental crisis. Only then can we stop this dangerous game we are playing.

For more on Hendrik Troskie and his book The 4^th Competitive Force for Good, go to https://www.linkedin.com/in/hendrik-troskie-ma-phil-3987298/

The Katingan-Mentaya Project forest is a living laboratory that is home to many ecosystems and a wide range of plant and animal species.

By David Fogarty

Climate Change Editor

In the Straits Times, 23 April  2021,

The vision is grand, the outcome could be just what the planet needs: investing billions of dollars to save vanishing nature and fight climate change at the same time.

The foundations of such a market already exist. Called the voluntary carbon market, it focuses on the ability of nature to soak up huge amounts of planet-warming carbon dioxide (CO2). Developers of conservation projects earn a return by selling carbon credits to buyers, usually big companies, to help them meet their climate goals.

Essentially, you are offsetting a portion of your own carbon emissions by paying someone else to do it for you.

The market, though still small, has shown it works. Scores of successful nature-based climate projects exist which avoid or lock away millions of tonnes of CO2.

Now, faced with the twin emergencies of climate change and biodiversity loss, investors want to remodel the market and channel huge sums into protecting and rehabilitating rainforests, mangroves and grasslands, and greatly expand the volumes of carbon credits, or offsets, for sale.

By the end of the decade, the market could be worth billions of dollars a year and Singapore is aiming to be a regional carbon credit investment and trading hub.

Efforts are well under way in Singapore and around the globe to make the market more transparent, more efficient and improve the quality and verification of the nature-based climate projects to entice large-scale investment. If done well, it could be a win for the fight against climate change and curb the loss of nature.

Trust and transparency

To get there, the market must overcome questions about transparency and concerns over ensuring every project does what it claims: reduces or locks away CO2 in a fully verifiable way.

And investors also need reassurance that the conservation or replanting projects are fully protected and not destroyed by fire or cleared for agriculture or logging. That’s where technology such as satellite monitoring comes in.

While existing projects have proved the model, the concern is whether vastly scaled-up investment will undermine the integrity of the market in the rush for carbon gold.

Carbon credits represent a tonne of CO2 reduced or locked away. It’s an attractive idea for customers such as car manufacturers, tech firms, banks and pension funds keen to hedge their future carbon costs.

A key focus, particularly in South-east Asia, is on saving natural ecosystems rich in carbon and with a high capacity for soaking up CO2, such as peat swamp forests. These forests and replanted areas need to be protected over the long term from logging, illegal clearing for palm oil and fires. Which is why well-run projects hire staff to monitor the project area on the ground, and in space using satellites.

Ultimately, the idea is about putting a value on ecosystems, a value that helps them compete with mining, industrial agriculture and logging interests.

The higher the carbon price, the greater the return – and the incentive for investors to take the risk.

The Singapore Connection

“Thanks to their rich forest, wetland and mangrove ecosystems, South-east Asia and Asia

generally are set to become one of the largest suppliers of natural climate solutions (NCS) globally. The region houses a third of the cost-effective NCS supply potential from both the protection and restoration of natural ecosystems in countries like Indonesia, Malaysia and India,” said Mr Mikkel Larsen, chief sustainability officer for DBS Bank.

That makes Singapore a natural centre for investing in these projects and trading the credits – this explains why Temasek, DBS and others are looking at ways for Singapore to capitalise on revamping the market.

The idea is to leverage Singapore’s long history in commodities trading and its well-regulated financial market. Singapore firms could use offsets as part of their emissions reduction strategies and, one day, carbon credits might be included in the nation’s carbon tax scheme.

Temasek has been helping to guide Singapore’s evolution into a carbon services hub and has bought offsets from two forest carbon projects to meet its internal emissions targets.

A Temasek spokesman said multiple approaches should be used in the fight against climate change, including carbon offsets. He added that Temasek hopes to support natural climate solutions and carbon projects that are of high quality and meet other social and environmental aspects, such as conserving and restoring important ecological systems like peatlands, rainforests and mangroves.

Preserving and rehabilitating these areas also reduce the risk of fires and haze, and are good for local communities.

Investor interest is being driven by mounting pressure on companies and governments to meet stringent climate targets. Globally there’s been a surge in pledges to reach net-zero emissions by mid-century. To get there, you’re going to need nature.

“Eliminating the 51 billion tonnes of greenhouse gases added to the atmosphere every year requires an enormous amount of global momentum and investment,” said Mr Dharsono Hartono, co-founder of the Katingan-Mentaya forest preservation project in Central Kalimantan on Borneo island.

“This is going to involve entirely rethinking how we produce energy, how we travel and how societies operate. But it also means rethinking how we treat nature. To keep global warming well below 2deg C, we must protect nature,” he added.

The Katingan-Mentaya project, comprising mostly carbon-rich deep peat swamp forest, is about twice the area of Singapore. Saving it from destruction by palm oil companies means about 7.5 million tonnes of CO2 are prevented from being emitted every year. Selling carbon offsets to big corporations, including VW Group, Shell and Bank of America, helps run the project and fund community programmes.

True potential

Mr Dharsono’s project, though, represents a fraction of the true potential if huge investment is channelled into well-managed and well-funded projects.

South Pole, a Swiss firm that has developed more than 800 carbon offset projects globally, sees big opportunities for investment.

“Nature-based solutions – such as forest protection and restoration – can actually provide over a third of the climate mitigation needed between now and 2030 to stabilise warming to below 2 deg C very cost-effectively. So investing in a cost-effective solution that can mitigate over 30 per cent of global greenhouse gas emissions seems like a no-brainer,” said Ms Leah Wieczorek, South Pole’s business development lead for Asia, who is based in Singapore.

Under the 2015 Paris Climate Agreement, nearly 200 nations agreed to limit global warming to well below 2 deg C and aim for 1.5 deg C above pre-industrial levels if possible.

Professor Koh Lian Pin runs the Centre for Nature-Based Climate Solutions at the National University of Singapore. He and his team have analysed areas of the planet that could yield good returns for investors.

In a recent study published in Nature Communications, Prof Koh and colleagues show that at an initial carbon price of US$5.80 (S$7.70) a tonne, the protection of tropical forests can generate investible carbon amounting to 1.8 billion tonnes a year globally – roughly the annual emissions of Japan and Australia combined.

Financially viable carbon projects could generate return-on-investment totalling US$46 billion a year, with the highest returns in the Asia-Pacific at US$24.6 billion, followed by the Americas and Africa.

And the higher the carbon price, the greater the area of forest carbon sites that could be conserved.

The recent surge in interest in carbon offsets is pointing to higher prices, especially buyers locking in future flows of offsets at higher prices for high-quality projects.

Groups such as former Bank of England governor Mark Carney’s task force on scaling up the voluntary carbon market foresee exponential growth over the coming decade.

“In 2019, just over US$300 million worth of trading took place on the voluntary market when these projects should be measured in the tens of billions of dollars per year,” he told a green finance summit in London last November.

Investors such as HSBC and Australia’s Pollination group, a climate change advisory firm, agree.

Last year, both teamed up with the aim of creating the world’s largest dedicated natural capital asset management company. They are launching a natural capital fund to invest primarily in regenerative agriculture and sustainable forestry projects. A second carbon fund is also planned aiming to ramp up investment in carbon offset projects. Overall, the intention is to raise up to US$6 billion in funds.

“We take the view that there is a huge amount of demand and very little supply such that investment is required in the underlying projects to scale them up rapidly,” said Mr Martijn Wilder, Pollination’s founding partner.

The funding model for nature-based projects has to change, he said, with significant upfront funding crucial to ensure projects get off the ground, are well managed and well protected.

“Protecting a rainforest is an infrastructure project. That’s what you’re doing.”

HSBC said escalating risks to the climate and biodiversity have changed mindsets.

“Today, nature is undervalued and overlooked by our investment community. This must change,” said Ms Melissa McDonald, the bank’s global head of responsible investment.

How to scale up

The existing voluntary carbon market has been around for about two decades and has strict standards for offset projects. But trading has always been small and opaque because it’s purely between buyer and seller and not on an open exchange. That needs to change, market players said.

The main standard-setting body that certifies offset projects, Washington-based Verra, has issued offsets representing 622 million tonnes of CO2 reduced from 1,697 projects to date. That’s the equivalent of taking 132 million cars off the road for a year.

And the market is growing. “We’ve seen that in terms of the volumes of the projects coming through the door. That’s definitely growing. We’ve seen in the last few years an increasing trend towards natural climate solutions,” said Verra CEO David Antonioli.

South Pole’s Ms Wieczorek said interest is growing in Asia, too. “We are seeing a dramatic increase in clients in Asia looking to make carbon reduction commitments,” she noted, adding that some clients are looking to lock in long-term offtake contracts.

“The vast majority of humankind’s carbon emissions are currently unpriced, so having a dedicated budget for offsetting also helps companies set or at least consider an internal price on carbon,” she added.

For now, though, Mr Carney, who is the United Nations special envoy for climate action and finance, said the voluntary carbon market still struggles with low liquidity and scarce financing.

To scale things up, Prof Koh said the market must overcome “pain points”. “The market will grow with our ability to improve the quality of those nature-based credits, our ability to reduce the cost of validation, of certification, to improve the transparency of monitoring those projects.”

Mr Larsen of DBS agrees.

“The thing that has plagued the voluntary carbon market for the longest time is issues around trust and integrity. The quality and integrity of the projects is believed to be too low,” he said. People buy a project and it doesn’t do what it is said to do, that’s the integrity. Or it creates problems and social issues, that’s the quality, he said.

“There’s no doubt that carbon offsets projects, if done right, do work, and they do sequester carbon,” he said. But he also feels that transparency around pricing and verification is needed.

Technology can help by improving the science and technology around projects, around verification of carbon stock, for example finding ways of improving carbon sequestration.

One firm that has brought price transparency is Singapore-based AirCarbon Exchange, a digital platform that trades fully verified carbon offsets. The exchange treats carbon offsets like a commodity with a range of offsets available for trading.

“The current market construct fails to send a strong price signal due to a fragmented project-based trading environment. A strong price signal will unleash pent-up capital to finance climate mitigating projects,” said Mr Bill Pazos, AirCarbon’s chief operating officer and co-founder.

Few in the market question the integrity of the standards set by Verra – it’s more that the problems lie elsewhere in the market as it has evolved. “These standards have been around for 15 to 20 years. They are very robust. They are constantly evolving and improving themselves,” said Pollination’s Mr Wilder.

Verra’s Mr Antonioli said they are constantly updating their standards according to changes in technology, regulations and latest scientific evidence.

Genuine action?

Some conservation groups say offsets are just a dodge, allowing polluters to buy their way out of making deep emission cuts to their operations.

That is untrue, key players said.

“It is impossible right now for most companies to achieve climate neutrality, a key milestone on the journey to meet net-zero pledges, without the use of carbon credits,” said South Pole’s Ms Wieczorek.

Offsets from well-run, fully verified projects can help firms that are already cutting emissions go the last mile.

For DBS’ Mr Larsen, carbon credits are responding to an urgent need. “We talk about carbon offsets as a potential point of delay and inaction. And I always really struggle with that because with a football field of rainforest being cut down every six seconds, the inaction lies in not trying to help.”

Mr Wilder said that for now, carbon financing remains a vital source of funding for conservation, despite the detractors. “The global climate is in crisis and we have to do everything we possibly can to reduce the risks. We shouldn’t be ideological about offsets and how we do it, provided the actions are real and have integrity.”

Go to Straits Times www.sph.com.sg for more of the best climate change reporting in Asia.