Three Critical Themes of World Environment Day – June 2024

Annually, in early June, global environmental stewards come together for World Environment Day in pursuit of driving meaningful environmental change and innovation.

At this year’s summit held in Saudi Arabia on 5th June, delegates focused on three critical themes: land restoration, desertification, and drought resilience – all pressing global issues. Saudi Arabia, a country best known for its vast oil production capacity and rising geopolitical status, isn’t without controversy over its credentials in hosting this event.

Saudi Arabia, notwithstanding its environmental and human rights record, is a prime example of the balance between economic development and environmental stewardship in the 21st century, with the vast swathes of oil profit being used to develop environmentally sustainable mega projects such as Neom and the Line (see below). It may be easy to reach for the oil revenues and greenwashing arguments, however, I would contend that the nation is committed to exploring all avenues of environmental sustainability, including land restoration and reclamation, drought resistance, and desertification. These are all highly pertinent topics within the Arabian Peninsula and surrounding Middle East.

Desertification is the process by which fertile land becomes desert, typically as a result of various factors, including climate change and human activities. It involves the degradation of land in arid, semi-arid, and dry sub-humid areas, leading to a persistent reduction in the productivity and health of ecosystems. Here are key points about desertification:

1. Causes:Climate Change: Changes in climate patterns, such as reduced rainfall and increased temperatures, can lead to desertification.Deforestation: The removal of trees and vegetation reduces the land’s ability to retain moisture and protect the soil.Overgrazing: Excessive grazing by livestock can strip the land of vegetation, leading to soil erosion and loss of fertility.Unsustainable Agriculture: Practices such as over-cultivation, improper irrigation, and monocropping can deplete soil nutrients and cause salinisation.Urbanisation: Expanding urban areas can encroach on and degrade fertile land.
2. Consequences:Loss of Arable Land: Desertification reduces the amount of land available for agriculture, impacting food security.Biodiversity Loss: The transformation of fertile land into desert reduces habitats for plants and animals, leading to biodiversity loss.Increased Poverty: Communities dependent on the land for their livelihoods suffer economically as their resources diminish.Forced Migration: People may be forced to move from degraded areas to seek better living conditions elsewhere, leading to social and political challenges.
3. Prevention and Mitigation:Sustainable Land Management: Practices such as crop rotation, agroforestry, and conservation tillage can help maintain soil health.Reforestation and Afforestation: Planting trees and restoring forests can help protect the soil and improve moisture retention.Water Management: Efficient irrigation and water conservation techniques can help sustain agricultural productivity.Policy and Community Action: Implementing policies that promote sustainable land use and involving local communities in land management decisions are crucial for combating desertification.

Understanding and addressing desertification is essential for maintaining ecological balance, ensuring food security, and supporting the livelihoods of millions of people worldwide.

We believe that sustainable investing can play an important role in allocating capital towards funds that prioritise these themes, thereby allowing investors to play a part in addressing environmental challenges and promoting a more sustainable future.

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Now where was I? In this Professional Paraplanner article, Louis Selby, investment research analyst at Square Mile Investment Consulting and Research, examines the three critical themes of World Environment Day and suggests five funds that follow such themes. Over the past 12 months, Square Mile has revised its fund analysis, moving away from company classifications to granular, revenue-based analysis. By distilling the entire global public market through approximately 400 unique revenue activities, they can now screen the UK investment fund universe for strategies with the highest exposure to specific activities through their investee companies. In the context of World Environment Day, they identified several revenue activities which include Alternative Energy, Sustainable Logging, Recyclable Materials, Sustainable Packaging, and Environmental Services. See the article for the funds emerging from the screening under this new 3D Investing framework having a significant exposure to one of these revenue activities.

This blog is for informational purposes and not professional financial advice.

What might investment projects look like?

Neom and The Line are ambitious mega projects in Saudi Arabia aimed at fostering environmental sustainability and innovation. These projects are part of Saudi Arabia’s Vision 2030, which seeks to diversify the country’s economy and reduce its dependence on oil by promoting sustainable development.

Neom

Neom is a planned cross-border city in the Tabuk Province of northwestern Saudi Arabia. The name “Neom” is derived from two words: “Neo,” meaning new, and “M,” representing the Arabic word “Mostaqbal,” which means future. Here are some key aspects of Neom:

1. Sustainability: Neom aims to be a model for sustainable living by integrating cutting-edge technologies and renewable energy sources. The city is planned to be powered entirely by renewable energy, including solar, wind, and hydrogen.
2. Innovation Hub: Neom is designed to attract global talent and investment in various sectors, including biotechnology, digital sciences, energy, and water.
3. Smart Infrastructure: The city will feature smart infrastructure, leveraging AI and IoT (see below) to create efficient and sustainable urban environments. This includes smart transportation systems, autonomous vehicles, and advanced waste management solutions.
4. Environmental Preservation: Neom emphasises preserving the natural environment, promoting biodiversity, and ensuring sustainable use of natural resources. The project includes plans for large green spaces and protected areas to conserve local wildlife and ecosystems.

IoT, or the Internet of Things, refers to the network of physical objects embedded with sensors, software, and other technologies that connect and exchange data with other devices and systems over the internet. These objects, often referred to as “smart” devices or “connected” devices, can range from household appliances to industrial machines, wearable devices, and even smart cities infrastructure.

Key Components of IoT:

1. Sensors and Devices: These collect data from the environment or user interactions. Sensors can measure various parameters such as temperature, humidity, motion, light, etc.
2. Connectivity: This involves the communication networks (Wi-Fi, Bluetooth, cellular, etc.) that connect sensors and devices to cloud services or other systems.
3. Data Processing: Once the data is collected and transmitted, it needs to be processed. This can occur on the device itself (edge computing) or in centralised systems (cloud computing).
4. User Interface: Users interact with IoT systems through user interfaces such as mobile apps, web dashboards, or voice assistants.

Examples of IoT Applications:

• Smart Homes: Devices like smart thermostats, security cameras, smart locks, and smart lighting systems that can be controlled remotely.
• Wearables: Fitness trackers and smartwatches that monitor health metrics and physical activity.
• Industrial IoT (IIoT): Systems used in manufacturing, agriculture, and logistics to optimise processes, monitor equipment, and improve efficiency.
• Smart Cities: Infrastructure such as smart traffic lights, waste management systems, and environmental monitoring to enhance urban living.

Benefits of IoT:

• Automation and Control: IoT devices can automate routine tasks, improving convenience and efficiency.
• Data-Driven Insights: Continuous data collection provides valuable insights for decision-making and problem-solving.
• Improved Efficiency: Optimising resource use and operations in various sectors, from energy management to manufacturing.
• Enhanced User Experience: Personalised and responsive services that adapt to user preferences and behaviors.

Challenges of IoT:

• Security: Protecting IoT systems from cyber threats and ensuring data privacy.
• Interoperability: Ensuring different IoT devices and platforms can work together seamlessly.
• Data Management: Handling the vast amount of data generated by IoT devices.
• Scalability: Building systems that can grow and manage increasing numbers of connected devices.

IoT is revolutionising how we interact with the world, making everyday objects smarter and more connected, and enabling new possibilities across various industries.

The Line

The Line is a key component of the Neom project, representing a revolutionary urban development concept:

1. Linear City: The Line is envisioned as a 170-kilometer-long linear city without cars and streets. It will be built around nature and designed to provide all essential services within a five-minute walk from any point within the city.
2. Zero Carbon: The Line aims to have a zero-carbon footprint by eliminating the need for cars and relying entirely on renewable energy sources. The city will use advanced technologies to minimise energy consumption and waste production.
3. Vertical Layering: The Line will have a unique vertical layering architecture, where all infrastructure, services, and transportation systems are stacked in three dimensions, reducing the city’s footprint and promoting efficient land use.
4. High Quality of Life: The Line is designed to enhance the quality of life for its residents by providing easy access to nature, high-quality healthcare, education, and entertainment. The city will prioritise pedestrian-friendly spaces and community-centric design.

Environmental and Social Impact

• Renewable Energy: Both Neom and The Line prioritise renewable energy, significantly reducing greenhouse gas emissions and promoting sustainable energy practices.
• Economic Diversification: These projects aim to diversify Saudi Arabia’s economy by fostering innovation and attracting global talent and investment in sustainable industries.
• Job Creation: The development of Neom and The Line is expected to create numerous job opportunities, contributing to economic growth and improving living standards in the region.
• Sustainability Leadership: By implementing these groundbreaking projects, Saudi Arabia seeks to position itself as a leader in sustainable development and urban planning on the global stage.

Neom and The Line represent a bold vision for the future of urban living, combining sustainability, innovation, and high quality of life to create a model for cities worldwide.

Questions & Answers

Q: What is the significance of World Environment Day?

A: World Environment Day is an annual event held in early June that brings together global environmental stewards to drive meaningful environmental change and innovation. It serves as a platform to raise awareness and encourage action on critical environmental issues.

Q: Where was this year’s World Environment Day summit held?

A: This year’s World Environment Day summit was held in Saudi Arabia.

Q: What are the three critical themes discussed at this year’s World Environment Day summit?

A: The three critical themes discussed were land restoration, desertification, and drought resilience.

Q: Why is Saudi Arabia’s hosting of World Environment Day considered controversial?

A: Saudi Arabia’s hosting of World Environment Day is controversial due to its vast oil production capacity and its environmental and human rights record. However, the country is making efforts to balance economic development with environmental stewardship through projects like Neom and The Line.

Q: What are Neom and The Line, and how do they relate to environmental sustainability?

A: Neom and The Line are mega projects in Saudi Arabia aimed at fostering environmental sustainability. Neom is a planned cross-border city integrating renewable energy and smart infrastructure, while The Line is a futuristic linear city designed to eliminate cars and reduce land use, promoting sustainable living.

Q: How does Square Mile Investment Consulting and Research approach sustainable investing?

A: Square Mile has revised its fund analysis to focus on granular, revenue-based activities rather than company classifications. This allows them to screen investment funds for strategies with the highest exposure to specific environmental activities, promoting sustainable investing.

Q: What are some of the revenue activities identified by Square Mile in relation to World Environment Day themes?

A: Some identified revenue activities include Alternative Energy, Sustainable Logging, Recyclable Materials, Sustainable Packaging, and Environmental Services.

Q: What should investors consider when looking for sustainable and ESG funds?

A: Investors should look for funds that have a clear commitment to environmental, social, and governance (ESG) criteria. These funds are designed to invest in companies that meet high standards of sustainability and social responsibility. For those seeking ethical investments, resources such as the Ethical Consumer survey and Fund EcoMarket are valuable for sustainable, ESG, and ethical fund research.