Transportation is the single most critical element to functioning supply chains. However, the growing transport sector strikes globally pose a risk to the unfettered movement of goods around the world. – Written by Seref Dogan Doğan
While AI is improving finance in so many ways, its growing global acceptance is creating uncertainty about the place of humans in a world that is increasingly machine-enabled. – Written by Seref Dogan Doğan
While they are at the heart of the cloud revolution currently unleashing the potential of the internet, data centers are also notorious climate polluters. The sector has received immense scrutiny for years due to its resource-gobbling operations and significant concerns over the ecological impact it has on local communities.
However, a recent report by McKinsey suggests that data center operations, at least in on-premises applications, may be a smaller concern relative to the substantial emissions from enterprise technology.
According to the report, corporate devices flood the earth’s climate with about 400 megatons of carbon dioxide equivalent gases. Overall, enterprise tech emissions total roughly 1% of global greenhouse gas emissions – or, to put this in context, the equivalent of the United Kingdom’s total carbon emissions.
I think that with the increasing pressure on companies and large corporations for more substantial action on climate and sustainability issues, the McKinsey report could hardly have come at a worse time. Nevertheless, the data holds an advantage for companies willing to put in the work on climate issues. As McKinsey note, “progress on climate change requires action on many fronts, and enterprise technology offers an important option that CIOs and companies can act on quickly.” I’ll look a bit more closely at this data below and the implications it raises.
End-user devices such as smartphones, laptops, printers, and tablets are the biggest culprit in enterprise tech emissions. Altogether, they emit between 1.5 and 2.0 times more carbon than data centers. There are a few reasons why this is the case.
First, corporate end-user devices are significantly more – and proliferate much quicker – than the servers in on-premises data centers. Employment booms, which have occurred often recently, typically cause device numbers to balloon, often on a one-to-one basis. Meanwhile, companies usually purchase servers and provision data centers based on forecasts of current and near-future use, and therefore need to upscale infrequently.
Second, end-user devices have a shorter refresh cycle than on-premises servers. For instance, smartphones typically get replaced in two years, while laptops and printers have refresh cycles of four and five years respectively. Meanwhile, servers get replaced every five years on average – and one in five companies wait even longer.
Third, and perhaps more importantly, emissions from corporate end-user devices are set to increase over the coming years at a CAGR of 12.8% yearly. This projected rise is driven by growing emissions from manufacturing, transportation, use, and disposal of these devices.
Consequently, taking action on enterprise end-user devices can be an effective way to quickly and sustainably slash corporate emissions. Some levers that companies may adopt include using energy-efficient devices, limiting the proliferation of these devices, exploring refurbished devices, and increasing product life span.
McKinsey also suggests that migrating from on-premises servers to “hyperscale” cloud-hosted computing may present one of the biggest emissions savings opportunities for companies. But can this provide the climate progress that companies need to establish their sustainability credentials?
While the drive towards sustainability through “hyperscale” data centers may yet bear fruit, the data center controversy continues to receive significant attention. According to figures quoted in the MIT Press Reader, the cloud now has a greater climate footprint than the aviation industry. Starkly put, “a single data center can consume the equivalent electricity of 50,000 homes.”
And what is perhaps most frustrating is that the substantial portion of this energy use does not even go to active computational processes – those take up only 6-12% – but instead to redundancies stacked upon redundancies needed to guarantee the now minimum 99% uptime required by cloud users.
Hopefully, moving to hyperscale data centers will markedly reduce the resource requirements of cloud computing. But only time will tell whether that will be the case.
A Bedford-based company has made history after signing a deal to produce and deliver ten 100-passenger helium airships. The deal, concluded between Hybrid Air Vehicles (HAV) and Spanish airline AV Nostrum, is expected to create 1,800 jobs in South Yorkshire and contribute to the UK’s sustainability goals.
The Airlander 10 airships will be built at a recently constructed green manufacturing cluster in South Yorkshire and are expected to provide an employment and financial boost to the local economy.
Beyond this, the Airlander 10, which HAV says will have less than a tenth of the carbon footprint per passenger of a traditional jet plane, represents a leap forward in the race towards a cleaner and more climate-friendly aviation industry.
Responsible for roughly 3% of global emissions, the aviation industry has long been a target for a green revolution. But climate-friendly air travel has remained largely within the realms of experimentation, until now. While various options including clean aviation fuel, electric planes, and direct capture devices have all received varying levels of consideration, the industry had shown little promise of a viable and scalable option that could drastically cut C02 emissions.
However, HAV’s futuristic Airlander 10 airships can potentially move the needle on climate progress within the industry. Acknowledging the progress that the company’s deal with AV Nostrum represents, UK business secretary Kwasi Kwarteng said, “hybrid aircraft could play an important role as we transition to cleaner forms of aviation, and it is wonderful to see the UK right at the forefront of the technology’s development.”
Kwarteng also noted that the local jobs being created by the deal was just as satisfying. “It is more proof of how the UK’s businesses are embracing new technology to drive growth and support high skilled UK jobs.”
There are many promising aspects to the Airlander 10 deal, but I believe industry players would be most interested by the multiple applications to which the aircraft may be put. HAV initially designed its airship as a surveillance and reconnaissance vehicle during intelligence missions in Afghanistan since it is less noisy than a helicopter and can stay in the air far longer. But it also has interesting applications in commercial travel.
With a 400km range and a rigid body that can land or lift off from any surface, the craft does not need a runway or pressurized cabins. Therefore, airship stations can be more space-efficient, while the aircraft itself can provide more windows and cabin space for passengers. According to Rebecca Zeitlin Head of Marketing and Communications at HAV, the Airlander 10 presents a more enjoyable, and potentially more luxurious, passenger experience. She says that “every seat will be a little bit like a business class experience. The whole experience will be more restful.”
Helium airships can also make an impact in disaster relief operations, such as combatting wildfires and effecting evacuations during emergency situations like tsunamis, flooding, industrial accidents, and earthquakes. The craft can carry more than 200 people per trip and potentially delivers four times the amount of water – up to 300 tons per day – traditional firefighting planes carry.
I think there’s a lot to anticipate from the blossoming rigid airship industry in the coming years. It would be to see how the aircraft performs in real life situations, and with AV Nostrum set to take delivery of its Airlander 10 airships by 2026, we may not have long to wait before we get to see them in action.
With the rise of robo advisors, automated portfolios, and intelligent algorithms, artificial intelligence (AI) is making an effective (and intimidating) incursion into the financial sector. Tasks that would have previously fallen to hordes of analysts are increasingly being turned over to digital processes, with remarkably efficient results. And unsurprisingly, this reality is fuelling a growing sense that finance jobs may soon fall to the implacable advance of AI.
Buttressing these fears, a recent study predicted that 230,000 jobs in the financial sector could vanish by 2025, swallowed by “artificial intelligence agents”.
The shift seems to have begun already as the Bank for International Settlements reports. An increasing number of high-profile financial institutions are moving routine processes to digital workflows and cutting down on staff sizes to support a leaner, smarter operation.
But is AI here to take all the finance jobs away? I think not. While it’s unquestionable that AI helps refine, accelerate, and improve certain previously manual processes, it’s equally important to recognise that human agents bring indispensable qualities to financial relationships, and this is what digital transformation and AI experts call the “Human Factor”.
I believe that the increasing presence of AI in finance is primarily attributable to the sector’s specific characteristics. For instance, accounting, audit, and finance are largely focused on numbers and rationality, and these are qualities that AI currently replicates with little difficulty. Consequently, studies conducted up to a decade ago – when AI had not reached the developmental stage it currently occupies – projected that up to 54% of jobs in finance could be lost to AI.
But concerns that AI will replace human financial advisors are premature, due to the unique and indispensable value-add that people bring to the financial sector. Yes, accounting and finance are mostly numbers-led, but they also require non-linear attributes, such as the gut instincts that precede placing a winning bet on a losing stock or the imagination to try an original approach and succeed where no one else has. And this, in my opinion, is the Human Factor that AI does not possess.
As described by AI experts SAP Insights, “AI is brilliant at automating routine knowledge work and generating new insights from existing data. What it can’t do is deduce the existence, or even the possibility, of information it isn’t already aware of. It can’t imagine radical new business models. Or ask previously unconceptualized questions. Or envision unimagined opportunities and achievements.”
AI lacks what physicist Michio Kaku describes as “intellectual capitalism” – “activities that involve creativity, imagination, leadership, analysis, humor, and original thought,” and this creates a world of difference between what AI and humans can do.
Like most industries, AI has facilitated the financial sector’s most valuable and influential advancements in recent years. For an industry struggling beneath the weight of billions of daily transactions, all with hundreds of spinoff processes, the addition of automation has unburdened and liberated many financial operations. Resultantly, AI unleashed greater possibilities in the sector and is potentially leading finance into the future.
But it would be a mistake to assume that AI can do it all on its own. As one expert puts it, “AI can make decisions, but not subjective choices. Humans, on the other hand, are still the best at judging intangibles and superlatives amongst options that are objectively equal.” Therefore, combining the mechanical efficiency of AI with the intellectual capitalism of human agents presents the best opportunities to unlock the possibilities in the financial industry.
After a minor COVID-induced drop, global energy investments rebounded to pre-pandemic levels in 2021 ($1.9 trillion) – an increase of 10% over 2020 – reports the International Energy Association (IEA). And in what will be music to the ears of policymakers and green energy advocates, much of the investment attention shifted from traditional fuel production to power generation and end-use sectors, with electricity attracting the lion’s share of renewable energy funding.
Amidst the tumult and uncertainty of the global pandemic, a strong theme advocated by governments and international agencies was the opportunity the crisis provided to “build back better.”
Indications from 2021 energy investments suggest that has been the case, at least as it concerns renewables. Here, I briefly discuss the extent of those investments and how they augur for a move towards net-zero and green economy.
Following projections that global energy demand would increase by 4.6% in 2021, energy financing experienced a general uptick as interest in infrastructure, and new projects surged during the year. Noting the upward trend in financing mid-2021, the IEA proposed that “the anticipated upswing in investments in 2021 is a mixture of a cyclical response to recovery and a structural shift in capital flows towards cleaner technologies.”
The IEA reports that global power sector investment accounted for a large chunk of 2021 energy spending, increasing by 5% to over $820 billion in 2021. Most of that financing ($530 billion) was directed toward new power generation; renewables accounted for over 70% of this amount. Asides from this, investors also saw more bang for their buck, with a dollar spent on wind and solar photovoltaic installations producing four times more electricity than ten years ago.
“Electrification was also a major driver of investment spending by final consumers,” says the IEA. “Electric vehicle sales continue to surge along with a proliferation of new model offerings by automakers, supported by fuel economy targets and zero-emissions vehicle mandates.”
In the same vein, BloombergNEF reported in January 2022 that the previous year saw a 27% rise in low carbon energy investments, with nearly half emanating from renewables investment in Asia. As a result, total yearly spend on energy transition was $755 billion, a new record in sustainable energy spending.
However, I must say that despite the encouraging short-term news, global energy investment has yet to breach the levels required to forestall climate disaster. The IEA also agrees, noting that “clean energy investment would need to double in the 2020s to maintain temperatures well below a 2°C rise and more than triple in order to keep the door open for a 1.5°C stabilisation.”
The big question, though, is where will that money come from? Blended finance might provide an answer.
Blended finance, a type of public-private partnership, combines public concessional funding with private investment to de-risk certain project types. As the World Bank puts it, “blended finance, which combines concessional public funds with commercial funds, can be a powerful means to direct more commercial finance toward impactful investments that are unable to proceed on strictly commercial terms.”
Renewable energy projects are frequently “constrained by investors’ perception of high risk and low returns,” Consequently, the flow of private capital into these projects is often halting. However, concessional financing in the form of debt, equity, or grants, appropriate risk-mitigation measures, and suitable seniority in terms of loss protection and the security of returns can make these projects attractive to investors.
The World Bank reports that blended finance could be vital in attracting larger investments in clean energy, and sub-Saharan Africa provides a model for how these partnerships can work.
Data privacy and security are a key focus for CFOs, says a 2019 survey by management consulting firm Protiviti. The survey, which polled 817 CFOs and finance leaders worldwide, reported that 84% of respondents rated data privacy/security as their top priority overall and second-highest budget item.
“Company-wide efforts – particularly regarding transparency, assurance, accounting and reporting insights – are now considered to be within the CFO’s expanding domain of accountability,” says PwC. “Areas like cybersecurity and data privacy need funding to provide preemptive action.” But the CFO’s work is pushing even those bounds of duty, as they must not only procure and channel the needed funds to IT and data security but also be actively involved in procuring cyber insurance to help meet the risk.
In a finance industry increasingly ruled by electronic data, it’s understandable that keeping customer information and internal corporate processes safe is top of mind. And considering the now commonplace incidence of expensive data breaches and security infrastructure failures, the stakes are higher than ever. Even a single breach can compromise the data of millions of customers, exposing companies to significant financial losses, severe brand damage, and expensive litigation.
For context, the average cost of a data breach was $3.79 million in 2015. But as of 2021, a data breach costs over $4.2 million, says IBM’s Security Cost of a Data Breach Report. And the longer the breach stays uncontained, the more expensive it gets, costing companies $1.26 million more if it takes 200 days or more to contain.
While the problem seems clear – companies cannot afford laxity when it concerns cybersecurity – any potential solution suffers from multiple complexities. For instance, how people interact with data is a serious risk factor for finance organizations. Data can move from permanent drives to the cloud and back easily, often with the aid of “shadow IT” or unsanctioned services. And the way that people use these services changes often, enhancing the risk that IT departments and CFOs must grapple with, both externally as it concerns their customers and internally in relation to staff.
Additionally, CFOs themselves are often targets of cyberattacks. As individuals who handle sensitive financial information with a high access level, CFOs are ideal candidates for Business Email Compromise (BEC) schemes. A threat actor may masquerade as a legitimate vendor to hijack transactions, divert funds, or steal critical financial information.
The risk for CFOs is clear, but how do they mitigate cybersecurity risk and implement solid programs that offer frontline protection? I believe the first step is knowledge-based.
As Protiviti states in its 2018 survey, “in all likelihood, most finance leaders lack sufficient understanding of the technical aspects and requirements of appropriate security and privacy measures, resulting in a fear of the unknown and substantial reliance on the effectiveness of others.”
Therefore, plugging these knowledge gaps will be indispensable to formulating and executing the required approaches to meeting cyber risk. A low-hanging fruit for CFOs in this regard is to pursue active collaboration with IT and security teams “to articulate and implement specific controls for and protections against cyber-risk.”
The UAE’s recently launched rail and transport project concretizes the country’s commitment to drastically reducing carbon emissions within its borders.
As scientists warn, global warming poses an existential threat to humanity, and the UAE is doing its part to avert this dire prophecy. As one of the world’s largest oil and gas exporters, the UAE is also amongst the world’s top carbon emitters.
However, the country has set itself a “very ambitious” goal to reach net-zero emissions by 2050, announced in October 2021, thereby becoming the first Gulf state to make a green public commitment of such magnitude. According to Aljazeera, this came on the heels of an earlier $165 billion clean energy investment pledge by Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum.
With the rail and transport project, the UAE is forging ahead on its climate goals, and I believe this might provide the push that helps other Gulf petrostates firm up on their green resolve.
The rail and transport project christened the “UAE Railways Program,” was announced in December 2021. The program provides an integrated system for the country’s railway sector, blending freight and passenger carriage that is planned to span all eleven UAE emirates.
Crown Prince of Abu Dhabi, Sheik Mohamed bin Zayed Al Nahyan, announced the program at the Dubai EXPO 2020 as part of the “Projects of the 50”, a series of economic and industrial projects aimed to accelerate development in the UAE.
The program’s central theme is national integration and sustainability, as captured by the Crown Prince in his speech. “The National Railways Program reflects the true meaning of integration into our national economic system,” says Sheik Mohamed bin Zayed Al Nahyan, “… it comes to support a national vision to connect the country’s key centers of industry and production, open new trade routes and facilitate population movement….”
Likewise, Sheik Mohammed bin Rashid Al Maktoum noted that “the project comes in line with the environmental policy of the UAE and it will reduce carbon emissions by 70-80%.”
I should note that, while the UAE Railways Program was only recently announced, it forms part of ongoing transport initiatives that the UAE launched earlier in 2016. The program includes three strategic projects:
The program also includes developing and deploying software applications to support planning, bookings, and integrated logistics solutions.
The rail and transport project is expected to contribute immensely to climate progress in the UAE. Current estimates suggest that the country could cut up to 80% of emissions within 50 years. However, it’s not clear how the rail and transport project will achieve such wholesale emissions reductions by itself or if the reductions touted are only expected within the transportation sector.
Nevertheless, I expect that eliminating millions of truck, vehicle, and train trips should make a dent in the country’s total emissions. For example, the UAE projects that roughly 36.5 million passengers should ply the railway by 2030. Similarly, the Etihad Rail service is reported to have already transported over 30 million tons of granulated Sulphur (saving approximately 2.8 million truck trips).
One point that citizens will praise is the internal focus of the investments underlying the program. For example, the railway program will gulp around AED50 billion, 70% of which is targeted at the local economy. Likewise, the program is projected to create approximately AED200 billion in economic opportunities and thousands of jobs.
I have closely followed the recent upsurge in energy costs that characterized the end of 2021. According to global reports, coal, gas, and electricity prices rose to decade-high levels in the final months of the year, and projections were that the energy shortfall would continue well into 2022.
The International Energy Association reports that gas prices are at a record, with costs as of 3rd quarter 2021 at ten times the price a year ago.
In addition, coal prices increased 5x compared to 2020 prices, and natural gas prices tripled in October 2021 to their highest levels since 2008.
Many factors have been fingered as culprits for the energy squeeze, but one that seems to be thrown in now and then is the effect of reduced investment in fossil fuels and capital transfer to fledgling green energy projects.
Right off the bat, I would like to emphasize that investment in green energy is not the cause of the energy crisis. Moreover, as both the International Monetary Fund and the IEA clarify, blaming the clean energy transition for the situation is “inaccurate and misleading.”
Instead, there are various factors involved, not least of which are the 2014 and 2020 commodity price collapses and the resurgence of energy demand after a COVID-induced hiatus. I will briefly outline some of these causes and how we can expect things to evolve.
While it seems like the energy crisis hit out of nowhere, there are longstanding reasons for the situation, and they mainly stem from the collapse of oil prices in 2014.
At the start of the 2010s, strong growth in the price of commodities created an oil industry boom, with prices sitting around $100 per barrel. The boom encouraged greater investment in the sector, significantly increasing supply. Similarly, developments in energy efficiency reduced worldwide demand, thereby creating an oil glut. However, major oil-selling countries failed to respond by lowering supply, and as a result, oil prices fell by 70% from 2014 to 2016.
One implication of this collapse was that investors lost appetite for new fossil fuel investment. Second, abundant oil also created a natural gas glut, making gas cheaper and a viable alternative for coal. Due to this, gas-fired plants gained ground, and the electricity systems worldwide began to rely more on gas instead of coal.
By the time COVID came around, the pause in fossil fuel investments was already several years old, and as Bloomberg reports, supply was already falling behind demand. COVID-19 tanked energy production globally due to lockdowns, the rampaging pandemic, and health regulations. While demand rebounded faster and stronger than expected, supply quickly fell further behind due to unexpected outages, a sizable maintenance backlog, and supply chain inefficiencies. Households and power plants began to compete for limited gas supply, which helped increase prices even more.
Currently, OPEC and Russia seem unwilling to intervene and help stabilize prices with increased supply. At the same time, the EU and other countries in the Northern Hemisphere have all but depleted their reserves in response to unseasonal weather, thereby leaving them unable to ease the supply hardships within their territories.
That said, I should note that climate policy is not exactly blameless in the overall operation of forces leading to this crisis. For example, increasingly stringent emissions targets in Europe, North America, and China have contributed to policies favoring gas (which is cleaner) over coal. But in the general scheme of things, climate policy has had a negligible effect on the crisis.
The causes behind the current energy crisis are myriad, so it’s uncertain how things will develop within 2022. While major oil producers will likely open up their stores and help provide stability at some point during the year, other factors such as maintenance difficulties and destructive weather events are less certain.
I believe one potential solution could be to increase investment in renewable energy sources to help make the global system less vulnerable to wild swings in commodity prices. With decentralized energy production and renewable sources enjoying more production capacity, the world can recover from these commodity cycles quicker and suffer less damage as a result.
There is a lot of interest and hope in hydrogen, but what exactly are we discussing?
Hydrogen is an extremely common element: 90% of the universe is composed of hydrogen (H) atoms. It is important to note that, like electricity, hydrogen is an energy carrier. It is an element that is used to transport energy from point A to point B.
The main advantage of hydrogen is its high energy density. One kilo of hydrogen can store three times more energy than one kilo of petrol, and one hundred times more than the best electric batteries!
This characteristic makes it possible to consider hydrogen as a very interesting alternative for the transport sector. Hydrogen increases the range of vehicles, especially those that travel long distances (cars, trains, heavy vehicles). Moreover, hydrogen is a gas; filling up a vehicle with a gas is much faster. While it takes 6 to 8 hours to recharge a vehicle’s electric battery, it only takes a few minutes for an electric vehicle that runs on hydrogen. Hydrogen allows both more energy to be carried, and therefore allows for longer distances to be travelled, and for a faster recharge.
Another option is to produce hydrogen from a very simple reaction: water electrolysis. An electric current is passed through water (H2O), which separates two molecules: hydrogen (H2) on the one hand and oxygen (O2) on the other. This process makes it possible to produce pure hydrogen in a clean way, provided that the electricity used to produce it is clean and therefore of renewable origin. Anyone interested in energy and ecological transition issues has therefore heard of hydrogen. But we can only talk about green hydrogen if it is produced from green electricity. This is where the challenge lies for an industrial scale roll-out.
The obstacles are not technological, since progress in this area has been remarkable in recent years. The issue is rather that of the primary energy source: green electricity, from photovoltaic, hydraulic or wind sources for example, must be available to produce green hydrogen. We know that the production of this type of energy is currently limited, so this is where we need to concentrate our efforts.
The state of affairs has changed considerably over the last 20 years. The technology is now advanced enough to allow its application in industrial tools and systems. The progress in performance is enormous. At the same time, the energy efficiency of fuel cells has been improved and prices have been reduced by a factor of 30 in 20 years. Cheaper and more efficient, the hydrogen sector has reached technological maturity.
At this point, I really think that hydrogen is a major asset in the transition to all-electricity. Europe is continuing to develop the sector, but the example is currently being set by Japan, which has the largest hydrogen-powered car fleet in the world and is aiming for carbon neutrality by 2050, thanks in large part to hydrogen.
I, myself, hope that the Japanese theoretical model can be applied as a practical model.