Best Investment

PARIS: While politicians and scientists are seeking to understand how quickly the planet is warming, many of the world’s chief executives already are feeling the heat to solve one of the biggest challenges of the 21st century.

“You’d better learn to make money from climate change or you’ll be eaten for lunch,” warned Paul Dickinson of the Carbon Disclosure Project, a group in London that monitors the readiness of companies to tackle global warming for investors managing assets worth about $31 trillion.

With evidence of climate change mounting, and ever louder calls to regulate emissions and energy efficiency, investors from bankers to fund managers to insurers are trying to find out “which industry is future-proof,” Dickinson said.

The impact of climate change is among the agenda-topping items at the annual World Economic Forum this week in Davos, Switzerland, yet another sign that company executives are seeking answers even as engineers and policy makers scramble for solutions.

“Public concern about the problem of climate change is dramatically higher than in past years,” said David Victor, a professor at Stanford Law School who is scheduled to speak at the forum.

The problem for business, Victor said, is that “the public and government are not sure what to do or how much all this will cost,” making it “a very confusing time for companies.”

Some business leaders insist that the global muddle over climate change should be no obstacle to creating low- carbon business models.

Ben Verwaayen, chief executive of BT Group, said initiatives by the telecommunications company like requiring suppliers to reduce the amount of carbon they emit could help BT satisfy similar demands from its own customers, creating an eco-friendly “chain reaction” within clusters of businesses.

Voluntary approaches like that could help stop climate change from becoming “an issue of taxation and regulation,” said Verwaayen, who is also a scheduled speaker at the forum.

But not all companies are able to move as decisively as BT. And unlike Verwaayen, some business leaders are emphasizing the need for more rather than less regulation.

“That’s a new flip,” said Nick Robins, head of sustainable and responsible investment funds at Henderson Global Investors in London. “Many far-sighted CEOs are getting involved on the public policy level and becoming advocates of business-friendly but environmentally robust regulations.”

To meet the requirements of the Kyoto Protocol, the European Union began capping the amounts of carbon emissions from industries in January 2005. In the United States, states in the northeast and California are developing similar policies. But the Bush administration refused to sign the Kyoto accord in 2001 and so far has resisted any form of mandatory laws on heavy polluters.

Business leaders complain that the legal limbo in the United States as well as weaknesses in the fledgling European system means that incentives to take advantage of current and emerging technologies reducing carbon emissions still are too weak.

“If we knew what the road map was, we could better plan the trip,” said James Rogers, chief executive of Duke Energy, a power company based in Charlotte, North Carolina, that is the third-largest coal user in the United States.

“It’s difficult to plan right now,” added Rogers, who is one of a number of American business leaders who have called on the U.S. government to put mandatory caps on carbon output and create more uniform nationwide rules so that companies can work out now how much to invest in expensive new technologies.

Philippe Joubert, executive vice president of Alstom, a French builder of power plants, said he expected his company to be ready with large-scale versions of technologies that captured and stored carbon under the ground or deep in the ocean by 2012.

So-called carbon capture and storage is increasingly seen by some climate change experts as a key technology for the 21st century because it could allow societies to continue burning fossil fuels like coal, but sequester the emissions that warm the planet.

Like Rogers, Joubert said the United States and Europe still needed to do much more to encourage companies to build “capture-ready” plants during the current investment cycle so that these facilities could be easily adapted later. Joubert also said new legislation might be needed to ensure that plans to bury massive amounts of carbon dioxide near communities and in the oceans meet minimal resistance.

Big polluters already have successfully reduced levels of sulfur dioxide blamed for acid rain.

But the gradual nature of climate change creates new dilemmas for industry as executives weigh whether it is worth investing when the worst effects could still be decades away.

Emerging markets produced great returns last year, but there were also several reminders of how risky they can be.

In May and June, fears of interest rate hikes in some of the most developed nations sparked a broad-based selloff in emerging-market debt and equity. Then a military coup in Thailand sent the local stock market down 15% in December as capital controls were implemented. And the president-elect of Ecuador roiled the local debt market when he reiterated plans to “restructure” the nation’s debt.

More recently, Venezuelan President Hugo Chavez announced plans to nationalize the nation’s largest telephone company.

Curtis Mewbourne, head of the emerging-markets portfolio team at the bond fund giant Pimco, makes a distinction between what he terms emerging-market “contagion” and the political and financial risks of investing in individual emerging markets. In commentary posted on the company’s Web site earlier this month, the fund manager compared days when all emerging-market asset classes are trading down in response to an external event to a local grocery store handing out a sign reading “10% off all items.”

“On such days, you don’t need to buy everything, but it’s certainly a good time to stock up on things that you want to have in the coming weeks and months,” he says.

But in the case of Ecuador, Pimco’s fund managers unloaded their exposure to the country even before the election, avoiding the eventual selloff in government debt, because they were concerned about the quality of the various presidential candidates and their platforms. In retrospect, Mewbourne says, this was a prudent decision “not because we ‘predicted’ the unpredictable … but because we believe that proper investment decisions always involve weighing the potential risks and returns within a risk-management philosophy that stresses capital preservation.”

Mewbourne expects that the asset class will continue to benefit from improvements in the economic fundamentals of individual emerging markets, along with supportive global economic conditions. These have dramatically reduced risk even as returns have remained robust.

He says some of the best potential returns can be found in local emerging markets, where interest rates remain substantially higher than in their developed-country counterparts. “Strong macroeconomic fundamentals and deep-seated institutional changes in the conduct of fiscal and monetary policy have set the stage for a secular convergence of emerging-market local interest rates toward developed-country levels,” he says.

As for contagion, Pimco fully expects there will be additional bouts of volatility but expects they will more likely be transient than permanent.

On the political front, the fund family will be paying close attention to developments in those countries that just completed presidential elections, such as Brazil, Colombia, Mexico and Peru, where the focus will shift to policy implementation. On the financial side, Mewbourne says risks remain for those countries with large current account deficits such as Hungary, Turkey and South Africa.

Geopolitical tensions and strong economic data provided opposing influences on the gold market Thursday, leading to a choppy trading session.

February-dated bullion contracts were recently losing 30 cents at $633 an ounce on the Comex division of the New York Mercantile Exchange, after having reached a high of $637.40 earlier.

The exchange-traded funds that hold bullion were gaining, with streetTracks Gold Shares (GLD) up 0.2% and iShares Comex Gold Trust (IAU) also edging ahead by 0.2%.

On the political side of the equation, Mahmoud Ahmadinejad, the president of Iran, was stirring things up in the Middle East with assertions that his country is ready for anything as it continues to defy the West in its pursuit of nuclear technology, the AP reports.

Some say the country’s leaders are seeking to develop atomic weapons, while Tehran claims it only wants to beef up its ability to generate power.

Elsewhere, it seems that U.S. talks with North Korea over its push for nuclear arms have broken down after looking relatively positive a day ago. John Bolton, the one-time U.S. envoy to the Untied Nations, says progress will only come after Kim Jong-Il is ousted, according to press reports.

“It’s a bit scary that they have nuclear capabilities,” says James Moore, an analyst at TheBullionDesk.com. “I think North Korea and Iran and are going to add support for gold and possibly shake out some of the less convinced shorts.”

Gold tends to rally on the prospect of instability and armed conflict, because some investors turn to it as a safe haven in times of crisis.

Back in the U.S., the economy continues to provide bullish economic news, which may auger a strong dollar for the foreseeable future, and hence a bearish environment for gold.

The Commerce Department says December housing starts grew at a better-than-expected 4.5%, while the Labor Department says new claims for unemployment fell more than expected last week. December core consumer price inflation, excluding the volatile food and energy components, came in as expected, rising 0.2%.

Foreign exchange dealers weren’t that impressed, owing to the view that the housing strength was related to the warm weather last month. The dollar was recently dipping against the euro, but rallying modestly against the yen.

One euro would buy $1.2948, vs. $1.2937 late Wednesday. A dollar would purchase 121.31 yen, up from 120.66 yen previously. Gold tends to move inversely in price with the dollar, and a strong economy will tend to lend support to the U.S. currency.

The economic data were robust enough to have at least one bear backpeddling.

“My view is currently that the probability of an outright recession is somewhat reduced,” says Nouriel Roubini, professor of economics at New York University. “The risk of a ‘growth recession’ is still very high,” meaning that the economy will advance, but at less than its potential rate.

A classic recession is typically defined as a contracting economy.

Last year, Roubini had forecast a yearlong recession for 2007 and has steadfastly remained one of the most bearish commentators on Wall Street.

In the gold patch, the Chicago Board Options Exchange Gold Index was declining 0.1%, dragged down in part by a 1% drop in Freeport-McMoRan Copper & Gold (FCX) .

Freeport was suffering from falling copper prices, which were recently shedding 6 cents at $2.51 a pound on the Comex.

HE WAS there to ensure the Glasgow Comedy Festival was launched with a laugh.

But when Tam Cowan joked that the event sponsor’s signature drink was “p***water” and he preferred a rival product, organisers must have feared they were about to see their financial backing go down the drain.

The comedian made his comments during the promotion of the fifth international comedy festival - sponsored by cider maker Magners - which takes place between 8 and 24 March. It will feature acts such as Joan Rivers, Paul Merton and Russell Brand, presenter of Big Brother’s Big Mouth.

Cowan was there to highlight his own show, Off The Bawl, a comic salute to football which he is performing with regular partner Stuart Cosgrove, whose day job is director of nations and regions for Channel 4.

During their routine Cosgrove suggested he was a more sophisticated consumer of cider than Cowan.

The latter responded by stating: “I drink Strongbow,” before going on to state exactly what he thought of Magners.

The comedy festival, which was launched in 2003, has now grown to become the largest in Europe and will this year feature 288 shows in 40 venues spread throughout the city.

This year will see many international acts take to the stage including Rivers, known as the First Lady of US comedy, Rich Hall, who is celebrated for his laconic satire as well as Australian comics such as Sarah Kendall, Jim Jeffries and Brendan Burns.

The stars of television past and present will also be in attendance. Jimmy Carr, presenter of 8 out of 10 Cats and Paul Merton, of Have I Got News For You will be joined by stars of the 1980s Cannon and Ball. There will also be a number of Scottish performers such as Frankie Boyle, a regular on Mock The Week, Phil Kay and Bruce Morton.

The event has been expanded to include a host of events designed exclusively to cater to children including The Singing Kettle, Scotland’s most popular children’s entertainers.

Yesterday Tommy Sheppard, director of the Scottish Comedy Agency, who are behind the event, said: “The festival has now grown to become a key event in Glasgow’s cultural calendar and is fast on its way to becoming a local institution. But just as importantly the event is now well regarded by the entertainment industry and any comedian worth their salt is keen to get into the programme.”

Joanne Hayden, marketing manager for Magners yesterday insisted the firm had not been offended by Cowan’s joke.

She said: “This new sponsorship provides us with a platform from which we can demonstrate our continued commitment behind the Scottish market and to recruiting new consumers.”

Celebrity Big Brother not only came to parliament this week, but to the lobby as well. While “Vazeline”, the slippery Keith Vaz, was inviting Tony Blair to jump aboard his publicity bandwagon during prime minister’s questions, half the lobby was caught up in the Big Brother storm in India, accompanying prime minister-in-waiting Gordon Brown on his latest foreign photo-opportunity.

By my calculation, at least five political editors - Nick Robinson of the BBC, George Pascoe-Watson of the Sun, Oonagh Blackman of the Daily Mirror Ben Brogan of the Daily Mail and James Blitz of the FT - were among the 15 or so lobby hacks banged up in Bangalore on the day Big Brother became big bother for the party leaders back at Westminster.

I say “banged up”, because I’m told the accommodation in Bangalore was not unlike the Big Brother house: not enough hotel rooms to go round, apparently, which meant - in some cases - three to a room.

According to unconfirmed reports reaching the Press Bar on Wednesday evening, one room was shared by Blitz of the FT and Larry Elliott of the Guardian (sharing the bed, I’m told - hope it was a double!) with Brogan of the Mail sleeping on the floor.

If this is the sort of hair-shirt regime we can expect under a Brown premiership, he won’t find many political editors accompanying him abroad in future. After all, we didn’t come into the lobby to stay in anything less than four-star hotels.

Nothing less than the Sheraton Carlton or the Embassy Row near the White House in Washington or the Kempinski near the old British embassy in Moscow will do for me, though I have fond memories of the Castiglione, across the road from the British embassy in Paris among the splendid shops of the Rue du Faubourg Saint-Honore.

(Fondest of all, of course, is Bernard Ingham pushing the insufferable “Sargy”, John Sergeant, down the steps in the embassy courtyard on the night of the first ballot in the Tory leadership contest in 1990.) India is not the greatest country in the world, either, for receipts or “blankos”.

Last time I was there, meals were so cheap the receipts were embarrassing.

(Worst place I ever went for receipts was Nizhniy Novgorod - formerly Gorky - in Russia on a ghastly trip with John Major in the mid-90s. The lunch receipts were so derisory I was almost too ashamed to submit them with my exspenses when I got back. Well, almost.) “We’ve filed two pieces from Bangalore,” one smirking colleague declared in the bar on Wednesday evening.

“One on Gordon’s dreary speech on the new world order, which won’t get in. And one on Gordon and Big Brother which is so bland the office are having to sex it up!” I wondered if even Blitz would have to file the Big Brother story.

“We don’t write about Big Brother on the FT,” a colleague had told me snootily earlier in the day.

Oh yes you do, mate! Blitz had a chunky page two lead - “Brown drawn into TV racism row” - on Thursday.

In fact, Blitz (great byline) is nowhere near as stuffy as his paper. Years ago when the lobby used to hold a Bad Taste Competition at party conferences in Blackpool (winner was the lobby hack who found the most vile, tacky, vulgar item in the resort’s souvenir shops), James was always an enthusiastic competitor. Back at Westminster, the drinks on Wednesday were on Ian Gleeson, a Downing Street press officer who is returning to the Foreign Office and a new posting in Moscow (ah, drinks in the Kempinski…).

His successor, James Roscoe, a dapper young man who’s arrived from the FCO press office has, I’m told, already caught the eye of the lobby totty, who tell me he’s rather more tasty than the bald, bespectacled Gleeson.

Another new No 10 arrival from the FCO, the tall Tom Soper, is also popular with the lobby ladies, I’m told. The sisterhood, I’m informed, considered running a candidate for lobby chairman against Adam Boulton of Sky News, who was elected unopposed last week, but the challenge never materialised.

Boulton, doyen of political broadcasters, took the chair at the afternoon briefings for the first time this week.

Well, apart from Tuesday, when he arrived, breathless, ten minutes late. Cheers and jeers when he finally entered the room.

Place your bets on Ms Blackman of the Mirror, the queen of the red tops, for chairman/person/woman next year, however. She’s already being tipped as Boulton’s successor. Over at the BBC, in Four Millbank, they await with interest the return of one of the lobby’s prodigal sons, Guto Hari.

The lobby’s very own Max Boyce (or is it Tom Jones?) abandoned SW1 for Rome to wait for the last pope to die and is currently doing stories about widgets and oil prices in the US.

My sources at the BBC say he could have had the top job on News 24, now occupied by James Landale, if he hadn’t been so impatient to get a foreign posting.

Now’s he’s coming back, initially, to do “the six” as they call it in the corporation, while former Lib Dem press officer Vicky Young is on maternity leave. Over in the Atrium, the bar downstairs in Four Millbank below the BBC’s sprawling offices, they recall Guto’s speech at his leaving do before he left for Rome.

He called his colleagues “saddoes” and mocked them for having to continue attending rather dull political briefings while he was off covering glamorous stories abroad. Never mind, Guto boyo, when you come back you can do stories about Big Brother.