TEDx Dharavi – the talk by Shailabh Kumar – made me sit up when I first saw it, many months ago. The warning shots he fired then echo equally aloud today, as the world watches ‘Dharavi’ with a bated breath. Shailabh’s vision is to replicate an ‘Amul’ model for Mutual health insurance, at the very bottom of the pyramid. Be it rural or tribal India and the urban slums.
A mutual is an entity which collectively pools its members’ risks, as opposed to transferring the risk to an insurer. The entity collects the premiums from its members and pays out the claims itself. The funds are retained and redistributed within the group. Members will donate funds (premium or contributions) into a pool held by the Mutual. In event of a deficit, members can be asked to make either supplementary payments or reduce the entitlement to loss compensation.
Speaking of Amul, livestock insurance was introduced in our country long before commercial health insurance for humans commenced. Coming from a family of four generations of doctors, I am aghast watching the erosion particularly in primary health care, inaccessibility to healthcare, deteriorating doctor to population ratio, health inflation, excessive commercialisation of medical education and the resulting exclusion of the poor. Covid-19 exposes the severe fragility of our healthcare infrastructure.
An alumnus of Tata Institute of Social Sciences (TISS) and an Ashoka Fellow, Pune based Shailabh has been working relentlessly to uplift the poorest of the poor from their daily healthcare challenges. Uplift Mutual works in Maharashtra, Gujarat, Dungarpur district of Rajasthan and very recently Tamil Nadu. The existing form of health insurance he says takes an ‘antibiotic approach’ – with no interest in keeping people healthy. Its current design is vastly different from what people want. Uplift Mutuals wishes to make it a ‘vitamin approach’ which prioritises well-being.
Praveen Gupta: In your experience what is the state of Primary healthcare both in rural and urban India?
Shailabh Kumar: Based on Uplift’s experiences in the slums of Pune, Mumbai and Tribal areas of Rajasthan and Gujarat – here are some observations:
| Primary Health Care | Rural/Tribal villages | Urban Slums |
| Availability | Low to negligible availability (non-working PHCs). Mostly Govt. facilities dotted with informal private providers and faith healers. | High availability, mostly private facilities. Public facilities either closed or staff unavailable. People prefer going to OPDs in public hospitals. |
| Accessibility | People prefer faith healers and local quacks. PHCs are far away and most of the time are turned away because of absence of medical staff. Where NGOs work, accessibility is better. | Doctors of all kinds are available within a kilometre’s distance. Private facilities are open based on people’s convenience whereas public facilities have fixed time often not matching with people’s availability. |
| Affordability | Low to extremely low. People prefer giving in kind to faith healers, charge low or give on credit. PHC are almost free but many times medicines are not available hence they have to buy from outside. | Can afford up to Rs.100 a consultation but should include three-day medicines (mostly generic). Otherwise short-term borrowing for managing cost of medicines. |
| Quality | Almost nonexistent, do more harm than good. | Doctors/Medical that provide immediate relief are preferred – very high use of steroids. Quality docs are available but navigation towards them is a matter of chance. |
| Seeking behavior | Waiting period ranges from 2-7 days before showing to anybody as distance and affordability major issue. | As availability is high, waiting time to seek care is lower but may hop from one to three doctors if no immediate relief. |
| Gender | Women and girls suffer the most. | Discrimination exists between girl and boy but in certain communities, overall lower than rural areas. |
PG: Don’t you think women and children need special attention?
SK: Based on what I have seen on the field there are very exhaustive public programmes available on maternal and infant health. What I have not seen are the primary screening facilities including pediatric and gynecology ones – also geriatric health is often missing.
PG: How critical is Primary Healthcare for the bottom of the societal pyramid?
SK: 7,000 people slip into poverty every hour in India because of catastrophic health expenses. 70% of all our out of pocket expenses on health care are on medicines and OPD. If one looks at this macrolevel data one realizes that if a good primary healthcare ecosystem is available, the poor will be able to take care of his/her health much earlier and therefore much better. Primary healthcare and a good quality accessible one with good referral facilities is essential if we want our bottom population to grow out of it. Primary healthcare along with follow ups and counselling can reduce hospitalization 8 out of 10 times based on our experience.
70% of all our out of pocket expenses on healthcare are on medicines and OPD… Primary healthcare and a good quality accessible one with good referral facilities is essential if we want our bottom population to grow out of it
PG: Do you come across health bankruptcy? How rampant is it?
SK: I understand you mean to ask healthcare expense induced bankruptcy for poor families! I have seen many families indebted for life, paying interest over two generations, losing all their savings, paying 50-70% of their income to health loans and this is not just rural but also urban phenomena. I have seen families stopping buying care for lack of financial resources specially for the elderly and when it comes to monthly medicines. I have seen people taking health loans at 120% per annum. I have seen children pulled out from school as one of the first casualties of health indebtedness. While I have not seen large numbers of acute bankruptcy, long term indebtedness and stopping of seeking care, is very rampant both in urban and rural areas.
I have seen families stopping buying care for lack of financial resources specially for the elderly and when it comes to monthly medicines. I have seen people taking health loans at 120% per annum. I have seen children pulled out from school as one of the first casualties of health indebtedness
PG: Are there any lessons to be learnt from countries like Cuba?
SK: Even before we look at Cuba, we need to understand the dramatic change in stance of the Government from building health care infrastructure to financing health care. COVID has laid bare this faulty thinking that the Government should increasingly get into health financing. Healthcare and education are two extremely critical infrastructure that need to be publicly funded. The fact that health is a state subject has a lot to do with the way our healthcare system is designed, and it varies from state to state. There are already many good practices available across states that can become the foundation of a comprehensive primary healthcare ecosystem. There are strong lessons emerging from the states that have been able to contain COVID and we must not lose them be it Kerala or Karnataka.
COVID has laid bare this faulty thinking that the Government should increasingly get into health financing. Healthcare and education are two extremely critical infrastructure that need to be publicly funded
PG: Is there a room for Public Private Partnership (PPP)?
SK: In fact, we should be talking about Public, Private and People Partnership. Government and Private interventions have their benefits and shortcomings but what is acutely lacking in this country is people participation in health. The supply side is far better organized than the demand side. If demand can be organized, we have better chances that health infrastructure whether public or private will be better utilised. From my personal experience health infrastructure at the primary health care level can have PPP but it should have a people financing component like an OPD cover insurance.
From my personal experience health infrastructure at the primary health care level can have PPP but it should have a people financing component like an OPD cover insurance
PG: The Gurudwaras for instance are doing commendable work locally and internationally – to fill some of the vacuum in the healthcare space due to the pandemic. This and any other similar initiatives could be institutionalised for greater good?
SK: Yes, the Gurudwaras can easily become a mutual health protection provider given the quality of solidarity and responsibility they command with their patrons. They should become the provider of primary health care financed through a mutual risk sharing model in the first stage.
PG: How could people-based infrastructure in insurance come to the rescue of the poorest of poor for their health insurance requirements?
SK: Any people-based infrastructure can organize or express demand better than a public or private entity. This is what a community based, or mutual insurance model does. For example, within Uplift Mutuals when we sat with poor women to design a mutual solution they were very clear that they would need this protection when they are old and hence the elderly should not be excluded from entering the risk pool. In another location we covered transportation costs for normal pregnancies as women said that this would heavily encourage institutional deliveries in rural areas. These features which come from listening to the ground are the ones missed often by commercial players.
Within Uplift Mutuals when we sat with poor women to design a mutual solution they were very clear that they would need this protection when they are old and hence the elderly should not be excluded from entering the risk pool
PG: As a counter to globalization, fiscal mutualisation is known to build resilience at local levels. So should an insurance mutual?
SK: We must realize the principle of proportionality in that every solution has its strong points and limitations. When only one size fits all kind of solution is available is where disproportionality affects. India has had only one model of doing insurance when there are others available too. What we need is a multiplicity of models in insurance for insurance is a very perception driven product. Mutuals build solidarity and responsibility from bottoms up. They are the building blocks that can be utilized by either public or private insurance to build better larger covers. Without a mutual base which focuses on risk reduction and good insurance behaviour neither public or private insurance solutions can last for long or will last with massive exclusions and control. It is this mutual platform that works as the first line of defense in any problem.
Without a mutual base which focuses on risk reduction and good insurance behaviour neither public or private insurance solutions can last for long or will last with massive exclusions and control
PG: Moreover, a women led and run Self Help Group (SHG) is bound to succeed in an insurance situation as well?
SK: By design, yes, but we can’t leave all to the women (they are already doing majority of the housework) and the SHG model – we need handholding, technical training, technology infusion, transparency & good governance protocols and the ability to take feedback from everyone without fear or favour. There is a gestation period of about 3-5 years where all this should happen. Yes, once the system is in place, it works without supervision, has quality checks and controls – an SHG design is one of the most suitable of institutions to run insurance. At Uplift Mutuals we have taken all the technical work away from women and women participate mostly in decision making across the functions (product design, process design, risk reduction design, claims settlement, policy governance) aided by a technical team.
An SHG design is one of the most suitable of institutions to run insurance. At Uplift Mutuals we have taken all the technical work away from women and women participate mostly in decision making across the functions
PG: What is your ultimate vision?
SK: I wish to make Uplift Mutual the Amul of health insurance.
PG: Truly inspiring! My best wishes, Shailabh.
Michele M. Wucker is a renowned American author, commentator and policy analyst specialising in the world economy and crisis anticipation. She is the author of bestseller The Gray Rhino: How to Recognize and Act on the Obvious Dangers We Ignore. In a world where metaphors tend to become cliched, as in the case of The Blackswan, Michele highlights their significance and the cultural nuances. She explains the many dimensions of globalisation, importance of global cooperation, how the pandemic makes it even more pressing. She points out the clear connections between climate and the corona virus. Reminds clean tech creates more jobs than dirty fossil fuels as renewables become more competitive.
Michele warns us about the ‘domino gray rhinos’ – made acute by the corona virus – debt crises, social unrest, and extra vulnerability to natural disasters and extreme weather by the people who have been hardest struck by the pandemic.
Praveen Gupta: How and when did you first come up with the metaphor ‘Gray Rhino’?
Michele Wucker: Right after the Greek debt restructuring deal in March 2012, I was thinking about the difference between the Greek and Argentine debt crises. I’d written a white paper in Spring 2011 arguing that Greece needed to learn from Argentina’s experience in 2001, when Argentina and its creditors passed up an opportunity to preemptively write down the country’s debt. In both cases, a debt crisis was a clear and present danger, but Greece managed to avoid a catastrophic collapse in and default, while Argentina plunged ahead into a chaotic default and prolonged crisis.
I wanted to explore the difference, and the image of a rhino came into my head when I was talking to a friend about something dangerous that was about to charge at you. He joked that I should call it a “black rhino,” referring to the “black swan” metaphor for unforeseeable, unpredictable crises that became popular in 2008. But I knew there were “black rhinos” and “white rhinos” in real life, but that both of those species were actually gray. It reinforced the metaphor for how we ignore obvious things: in this case, the color of a two ton beast about to charge at you.
I wanted to explore the difference, and the image of a rhino came into my head when I was talking to a friend about something dangerous that was about to charge at you.
PG: Storytelling is universal, and metaphors can be a very effective component. Asia where 60% of the humanity resides, do you notice any unique penchant?
MW: I have been honored by how warmly Asian audiences have embraced the gray rhino metaphor, which I think has resonated because Asian cultures tend to be more attuned to long-term thinking and to complex systems thinking which are essential parts of gray rhino theory. I do not think that the typical Western focus on short-term incentives and outcomes and use of linear logic is up to the challenges our world faces now and into the future. While the gray rhino has been very influential in European risk management circles, and in certain financial and policy communities in the United States it took a pandemic for the concept to take off in a big way here.
I have been honored by how warmly Asian audiences have embraced the gray rhino metaphor, which I think has resonated because Asian cultures tend to be more attuned to long-term thinking and to complex systems thinking which are essential parts of gray rhino theory.
PG: Do you believe metaphors have a lifecycle? They are sticky, tend to get cliched and frequently misused? The Black swan for instance!
MW: The Black Swan definitely was misused, as investors and regulators used it as a cop-out excuse in the 2008 crisis: “Oh, nobody could have seen it coming,” when in fact there were many unheeded warnings about problems with subprime loans. People forget what it ought to be used for: to broaden the idea of what might be possible and to use that widened imagination to develop more resilient systems. The elephant in the room – which just stands there and gets ignored – also has outlived its usefulness because it normalizes the idea that people don’t talk about big, inconvenient truths; it also suggests that these problems stand still and that it’s possible to ignore them indefinitely.
The gray rhino is big, impactful, dynamic, gives us a choice, and speaks to the moment we are living now. Unlike the elephant in the room, people DO talk about gray rhino risks, but they still too often fall short when it comes to dealing with them effectively. Just think about what the world might look like if more people focused on solving obvious gray rhino challenges instead of obsessing about black swans which are hard to prevent because you can’t even picture what they look like.
The Black Swan definitely was mis-used… People forget what it ought to be used for: to broaden the idea of what might be possible and to use that widened imagination to develop more resilient systems.
PG: “Walls will not stop viruses, neither they will mitigate Climate Change or protect from its impact”. Borrowing this quote, do you believe in the long-term globalization is unstoppable notwithstanding all the upcoming barriers?
MW: Globalization can have many meanings, so there are many answers to this question. The global spread of ideas and information is as hard to stop as a virus. Unfortunately, that is as true for lies as it is for truth. As for the definition of globalization that includes travel and trade, we are already seeing re-thinking of supply chains. For some countries that means bringing some production onshore, but for others it may mean finding additional global partners. It doesn’t help to have all of your production at home if your own country is crippled; you need to diversify. I do think it is a good thing for more goods to be made closer to home, in order to reduce the climate impact of long-distance transportation.
We will see significant short-term changes to travel because of efforts to contain the virus. As people become more comfortable with virtual meetings, many will deem more travel less necessary even when it is safe to increase travel again. But the big message about globalization that we should take from this involves the importance of global cooperation to solve problems: the pandemic makes clear that countries need to work together on so many issues that do not respect borders, much less walls.
But the big message about globalization that we should take from this involves the importance of global cooperation to solve problems: the pandemic makes clear that countries need to work together on so many issues that do not respect borders, much less walls.
PG: Yet, in the short-term the corona virus outbreak may exacerbate nationalism and stall climate change action?
MW: The pandemic absolutely is stoking nationalism, which not only creates all kinds of other dangers but gets in the way of dealing effectively with pandemics and other global threats. In terms of how the virus affects our response to climate change, things could go either way. Many people are noticing how nice it is to see blue skies. They also are starting to pay more attention to the importance of dealing with problems earlier on. And there are clear connections between climate and the coronavirus. For one thing, rising temperatures are releasing more pathogens from the permafrost. For another, the same greenhouse gas emissions that contribute to climate change also pollute the air and make people more vulnerable to respiratory viruses.
On the other hand, people who are not used to systems thinking want to solve one problem at a time, which pushes climate change to a back burner. And policy makers worry about the cost of new, cleaner technologies. But we also need attention to jobs and the economy – and clean tech creates more jobs than traditional, dirty fossil fuels, even as renewables are becoming much more competitive economically.
Clean tech creates more jobs than traditional, dirty fossil fuels, even as renewables are becoming much more competitive economically.
PG: What is the next big Gray Rhino likely to be?
MW: This is a question that is most helpful when people ask and answer it for themselves, so I answer it only with the greatest caution. But in general, I see a set of what we might call domino gray rhinos: things that the coronavirus is accelerating and making more acute: debt crises, social unrest, and extra vulnerability to natural disasters and extreme weather by the people who have been struck hardest by the pandemic. These are all related to the triad of gray rhinos – climate crisis, financial fragilities, and inequality – that are always on my mind and interact with each other. But I didn’t create the concept to be the world’s chief gray rhino spotter. I want it to be a tool for everyone to use to spot and wrangle the gray rhinos around them, because all of us need to change our mindsets to become more pro-active in dealing with the challenges whose existence we’d much rather deny.
I want it to be a tool for everyone to use to spot and wrangle the gray rhinos around them, because all of us need to change our mindsets to become more pro-active in dealing with the challenges whose existence we’d much rather deny.
PG: Is Asia’s hunger for limitless growth and consumerism a breeding ground for future Gray Rhinos?
MW: It’s not just Asia – the obsession with consumerism is everywhere, as is the tendency to ignore negative externalities, or the costs that a business creates that others end up paying. We need to re-think growth to include quality, not just quantity. Economic growth in one area may come with big costs to another part of the economy, and we’re not counting that well enough.
Economic growth in one area may come with big costs to another part of the economy, and we’re not counting that well enough.
PG: Why do humans tend to miss out on spotting a Gray Rhino? Are the blind-spots rooted in culture or are of cognitive nature?
MW: Humans miss spotting gray rhinos – and when we do spot them are all too likely to look away – for various reasons involving cognitive biases, culture, incentives, organizational and government structures. All these work together to shape our sense of human agency: the belief that we have the power to change the course of events. If we feel a problem is too big for any one of us to have an impact, we ignore it, as too many people have done when it comes to climate change. But when we feel we can make a difference – as so many (though still not enough) of us have learned with sheltering in place and wearing masks – people are more likely to step up to a gray rhino instead of ignoring it.
Humans miss spotting gray rhinos – and when we do spot them are all too likely to look away
PG: Appreciate these fantastic insights, Michele. Let us set our sights on all the potential #GrayRhinos…
Ashley Cooper is an ace photographer and a unique explorer, based in the U.K. He evidences #Climate Change through his brilliant work. When I last interviewed him, I had not seen his book www.imagesfromawarmingplanet.net, a classic in its own right. Having gone through his phenomenal creations again and again – which stand out both in terms of the depth and the sweep, I had to speak to him again. There could not have been a more compelling backdrop than the #pandemic that threatens the existence of us all.
Praveen Gupta: You started your book project in 2004, literally travelled across the world and published it in 2018. How do you reckon could the start and finish be any different if you were to commence this project now?
Ashley Cooper: It would be hugely different, firstly the changes I was witnessing in the Arctic 16 years ago would be hugely magnified now. A shocking change in a short period of time. Glaciers will have receded massively, and permafrost melt will have accelerated hugely. The incidence of wildfires has increased on a massive scale, so much so, that now an area larger than the size of India is burnt every year, one of the many feedback loops of climate change. Visiting places like Tuvalu to document sea level rise, would see the seas rising to higher levels now, than when I visited in 2007. Everywhere you look climate change is accelerating.
On a separate note, it would be economically impossible to set off to undertake this venture again without a wealthy backer. The 14 years it took to document climate change on every continent cost me around £300,000 not including my time. this was all funded from sales of the images into newspapers, magazines and books, at a time when they paid an ok rate for imagery. That rate has collapsed in recent years, meaning it would be financially impossible to set off today to try to undertake the same mission.
PG: Were there any symptoms you noticed that told you loud and clear – that our planet was falling sick?
AC: Yes, they were all around and obvious if people would educate themselves on the issues and open their eyes to see. With every passing year, the weather extremes are becoming more frequent and more extreme. Trees in Europe are dying of diseases that were not prevalent only a few years ago, particularly Larch and Ash trees. Parts of the Amazon rainforest are drying up and the trees are less healthy. The oceans are warming rapidly and filling even morerapidly with plastic. The bleaching events on the Australian barrier reef have killed off over half the reef, all these things scream loud and clear to us that the planets health is ailing. I am a keen birdwatcher, and I have noticed in my lifetime, once common species almost disappear. Many birds especially farmland birds, that were common in the 1960s and 70s have declined by up to 90% We just need to notice the changes that are around us. Each generation can only know what they experience, for younger generations, a landscape depleted of nature is for them the norm.
They were all around and obvious if people would educate themselves on the issues and open their eyes to see... Each generation can only know what they experience, for younger generations, a landscape depleted of nature is for them the norm.
PG: Do you see any inter-connection between Covid-19, Climate Change and pollution? Does the sweep and speed of the spread surprise you?
AC: I am not surprised by the speed of spread of Covid-19. We live in a world where a disease can be transported to every country on the planet via air travel in a single day. This interconnectedness is a luxury that leaves us vulnerable to new pathogens. The very activities that are accelerating climate change are also ones that make disease transmission from nonhuman to human ever more likely. Forests, the carbon sink of the planet is being chopped down at an alarming rate. Species in these inaccessible places have been harbouring diseases for millennia. As more forests are chopped down, people access the animals that live there for bushmeat, making it hugely more likely that diseases can jump species.
Pollution is a massive global problem and linked to the devastation that Corona is wreaking. Toxic pollution from burning fossil fuels, leads to lung disease, heart disease and cancer. All these weaken people and make them far more vulnerable to the virus. Air pollution has been linked to asthma for years, but more recently it has also been linked to dementia. Air pollution in the UK could be responsible for 60,000 cases of dementia with people exposed to dirty air 40% more likely to develop the disease.
Pollution is a massive global problem and linked to the devastation that Corona is wreaking.
PG: Malaria, Mental illness, Cancer – you allude to these in context of some of the locations that you were shooting in. Bill McKibben talks about Dengue in parts of Europe and who knows what lies in store with the melting permafrost?
AC: As temperatures rise, disease carrying vectors are changing their distribution patterns, ensuring that the diseases they carry impact on new human hosts. Malaria is an obvious example, the mosquito that carries it is moving rapidly into areas that were once too cool for it to survive and would have been considered safe from the disease. The same is the case for many other diseases. Rates of mental illness are rising steeply in the developed world. Eco anxiety is now recognised to impact the lives of many people, with folk becoming anxious at the uncertain future that climate change promises every citizen of the planet. Many cancers are linked to toxic fossil fuel emissions, these and cardiopulmonary diseases caused by fossil fuels are costing health services around the planet $billions every year.
Eco anxiety is now recognised to impact the lives of many people, with folk becoming anxious at the uncertain future that climate change promises every citizen of the planet.
In addition, millions have their lives cut short on average by 7-8 years when they live in highly polluted environments. Ironically, they now reckon that the numbers of people killed by corona in China, is less than the number of people who would have died from the levels of air pollution present, before the lockdown lead to a huge improvement in levels. Permafrost melting may well release long locked away pathogens, but far more worrying is the fact that it has the potential to release giga tonnes of methane, a greenhouse gas some 32 times more potent than CO2.
PG: Your portrayal of the fragility of Shishmaref (the island between Siberia and Alaska) and the existential crisis faced by the Inuit community is very poignant. Was that also meant to be a metaphor for the rest of the world?
AC: The Inuits of Shishmaref are a great example of something I have seen the world over. That those least responsible for climate change are most impacted by it. Living a largely hunter gatherer lifestyle, their carbon footprint was tiny compared to an average North American. Their houses were being washed into the sea, as the sea ice that used to protect their island from winter storms and subsequent coastal erosion was not forming, if at all, until 3 months later than it used to.
The Inuits of Shishmaref are a great example of something I have seen the world over. That those least responsible for climate change are most impacted by it.
When the book went to print the residents of Shishmaref took the unprecedented vote to abandon the island that had been their home for hundreds of years. In this respect, they are the canary in the coal mine, a metaphor for what millions of us can expect from ever rising sea levels, that will create unprecedented levels of global refugees.
PG: During your travels did you notice anything unique about Asia? Given its teeming population, fossil fuel intensive industrialisation, biodiversity and vulnerable geography?
AC: Many areas of Asia are very vulnerable to climate change. Typhoons are becoming more frequent and more aggressive, causing ever more destruction. Devastating flooding affects some parts, whilst others are drying up and turning to desert. Many low-lying areas, especially Bangladesh are extremely vulnerable to the impacts of sea level rise. India and China, both with rapidly growing populations and rapidly growing economies, are now significant emitters of greenhouse gas. Much of this is from coal fired power stations being built to meet the increasing demands for energy. It is vitally important that these countries be allowed to develop, but not making the mistakes that were made in the western world.
India and China, both with rapidly growing populations and rapidly growing economies, are now significant emitters of greenhouse gas... It is vitally important that these countries be allowed to develop, but not making the mistakes that were made in the western world.
PG: Was the level and pace of adoption of renewable energy, in Asia, satisfactory?
AC: China has spent $billions on renewable energy, mainly solar and wind power and India is starting to catch up, both these countries have huge potential for renewable energy generation, and both countries have masses to gain by reducing the hideous levels of air pollution that blight millions of lives. For this investment to continue, especially in India, power utilities need to pay the proper price of burning coal, i.e. all the pollution and climate change costs, that will rapidly make renewables a far more attractive and cheaper option.
PG: Any signs of hope that you see in these distressing times? Do you believe post Covid-19 the world will change for good – despite some of the countries using this as a cover for promoting questionable fossil fuel projects on the sly?
AC: We must remain optimistic. We have seen levels of emissions and pollution plummet during the Covid outbreak. This will bring relief to millions. Everyone has enjoyed the quiet and peacefulness of lack of vehicles on the road and cleaner air to breath. We need to have a conversation about how we can keep some of these benefits in a post Covid world. We have proved that it is very easy to reduce emissions. To fight Covid we need to tackle the climate emergency with the same zeal, as it poses a far greater threat to humanity than the Covid pandemic.
We have proved that it is very easy to reduce emissions. To fight Covid we need to tackle the climate emergency with the same zeal, as it poses a far greater threat to humanity than the Covid pandemic.
I hope the pandemic will allow people to see that life can be lived at a slower pace, with emphasis placed on nature and wellbeing. It is high time we stopped valuing how big our car is, and measure our wealth in the love of our family and friends, in the access to nature which sustain and supports us, and it to treading far more lightly upon the planet so that future generations stand a chance of living a fulfilling life. What Covid should really teach us is that we are vulnerable, we are a part of nature not apart from it, and that we need to work with not against nature. If we learn these lessons and implement them, then we stand a chance of avoiding the worst excesses of climate breakdown. If we don’t learn them, we do not deserve to have a future on this planet.
PG: May you continue to delight and educate the world with your creations, Ashley.
The Black Swan really stirred every imagination with the 9/11 and the GFC 2008 in the backdrop. However, once strongly entrenched – it became an unmovable goalpost and a stereotype frame of reference for every risk manager. Despite its merit, it ended up as a cliché for a lazy user. Mind you, we all have our own fascinating and unique layers and layers of stories, fables, myths and what have you. Further juxtaposed by piles of fantasy and reality – a spectrum ranging from muddied to crystal clear. Then there are times when the fantasy gets jolted by a reality check. If not, it could remain cob-webbed or make you fantasize and interpret the reality in shades and colours that are unreal.
Mind you, we all have our own fascinating and unique layers and layers of stories, fables, myths and what have you. Further juxtaposed by piles of fantasy and reality – a spectrum ranging from muddied to crystal clear. Then there are times when the fantasy gets jolted by a reality check.
In my menagerie sit many – earliest ones go back to Aesop’s Fables, Panchatantra, host of nursery rhyme influenced including black sheep. Cry wolf is one that oscillates from reality to the fake to reality and reminds you of the changing dynamics. Disney is full of them. But despite the diversity of such sign-posts – we tend to be dominantly conditioned by the once upon a time game changing jolter. That results in the time warp of our storied past. Such a risk can only be mitigated by seeking a fresh signal notwithstanding the attendant noise. Michele Wucker’s Gray Rhino is one such profound wakeup call. Whether you are looking at financial, climate or pandemic risks.
Michele Wucker’s Gray Rhino is one such profound wakeup call. Whether you are looking at financial, climate or pandemic risks.
There is nothing like a face to face interaction with an author. This was, however, a long-distance hookup with a cohort, courtesy Preventable Surprises. In the quiet of my Mumbai home, while the country is under a corona virus lockdown, I did manage to get on to the call. Listening to her build on the premise and answering a slew of amazing questions – my mind focused on some of the words that came along. But before that, this is how Michele demolishes the entrenched misplaced narrative; “Given what we know about pandemics and their increasing likelihood, outbreaks are highly probable and high impact. I coined the term “gray rhino” for exactly such events: obvious, visible, coming right at you, with large potential impact and highly probable consequences.” Interestingly, in a recent interview on ‘Bloomberg Markets’ Taleb has himself said that the coronavirus pandemic was preventable. It is not a black swan but a white swan.
Interestingly, in a recent interview on ‘Bloomberg Markets’ Taleb has himself said that the coronavirus pandemic was preventable. It is not a black swan but a white swan.
Metaphors first! Black Swans fly long distance – should they thereby allow you an opportunity to anticipate them, provided you have the right tools? A Gray Rhino will charge at you, like a sprinter it will be a short burst. You need to decide quickly as to whether flight or fight! Michele highlights how the societal mindset and diversity determines your response mechanism. The challenge in the USA is about the white male mindset and the American individualism. Some call it coronavirus maximalist versus coronavirus minimalist. On the other hand, the Chinese society is dependent on the state. The top leadership gets involved in preempting the gray rhino. The risk management process, therefore, flows top down.
At this point it is also meaningful to checkout the looking glass of the risk function – a profession charged with anticipating and mitigating risk. It needs to keep an eye on both – the rear view and the front. History shows serious lapses on its part. So, what holds it back. Is there something inherent that creates blind spots? Individualism might fester dissent. But that is good for generating diverse viewpoints. How far does it come in the way of execution? The discussion the other day did suggest it does. Could there be other reasons?
At this point it is also meaningful to checkout the looking glass of the risk function – a profession charged with anticipating and mitigating risk.
Many months ago, I was in a conversation with the Chairperson of a global risk committee. In response to how should the function be revisited – I said it is too risky to leave the risk function to ‘bean-counters’ alone. As a part of the mix you also need people with liberal arts background. That fosters diversity of the right and the left-brain. Somewhere Taleb has said it is very easy to say retrospectively that one could see something coming. But prospectively it is very difficult. Liberal arts bring along the much-desired imagination.
it is too risky to leave the risk function to ‘bean-counters’ alone. As a part of the mix you also need people with liberal arts background. That fosters diversity of the right and the left-brain.
Global businesses homogenizing risk functions – run the risk of replicating the home country’s ‘tried and tested best practices’ far and wide. In the process they create a systemic risk of their own making. That is ‘anti diversity’. You not only impose a protocol lacking diversity, but you also snuff out the opportunity to imbibe the genius of a location. This need not always be a West to East issue. Toyota’s was a case the other way around.
At this juncture neither the global leaders nor the risk managers are effectively connecting the dotted lines between Climate Change and the Pandemic. What holds them from the obvious link? A recent paper suggests that Pentagon might have been aware of the potential outbreak of the Corona virus. Ahead of the 9/11 the CIA had enough signals but as always was besieged with excessive noise. Why do banks, asset managers and insurers continue to invest in fossil fuel? Why aren’t their risk managers rebelling? Should we allow this Gray Rhino to rampage and then wait for the next one to repeat? Here is an opportunity to catch the rhino by the horn. Does not matter whether he or she has two!
Damandeep Singh, is the Founder & Director, Carbon Disclosure Project (CDP) India since 2012. Prior to this Daman spent over three decades writing and researching on environment and development issues in India. He worked as an independent researcher and journalist primarily on environment and climate change issues, executing projects for ERM UK, Worldwatch Institute, The Climate Group, Bureau of Energy Efficiency among others. He started his career as a journalist and has worked with major national dailies like The Times of India, The Pioneer, Business Standard and The Indian Express.
Given that as a country we are amongst the top three CO2 emitters in the world and with a rising aspirational middle class the emission challenge will only compound. While our industry needs to quickly transition towards renewable energy, individual lifestyles require to be tailored for sustainability. In this interesting conversation Daman covers all these concerns and much more.
Praveen Gupta: What is Carbon Disclosure Project (CDP)?
Damandeep Singh: CDP is the world’s largest disclosure platform for investors, companies, cities, states and regions to manage their environmental impacts 2019 over 8440 corporations, 950 cities, 120 states and regions disclosed through CDP. In India we work with a dozen cities and five states. In India, 49 of the top 200 companies share their data voluntarily including most of the Tata group, Mahindra Group, JSW; Vedanta all cement majors and many PSEs like NTPC, Indian Oil, GAIL among other. If you were to add another 10 self-selecting companies plus 120+ MSMEs the figure gets close to 200.
In India we work with a dozen cities and five states… 49 of the top 200 companies share their data voluntarily.
We ask them to disclose their impact on climate change, water & forests and their efforts to mitigate their impact. This is long drawn out process and requires detailed engagement as well follow. Many, understandably, are apprehensive about disclosing data that is material to their operations as even the government does not ask for it.
In a world where markets, investors and buyers are increasingly looking at ESG (environmental, social & governance) parameters, we try to convince companies on the value of sharing information which is vital to global investors and buyers. These are the two key drivers for disclosures. Investors really want to understand what the long-term impacts of their investments would be. Also, big buyers globally including Walmart, L’Oreal, Microsoft etc. are insisting on this information and as companies to disclose through CDP.
Investors really want to understand what the long-term impacts of their investments would be.
PG: How do you verify the carbon emission data shared by disclosing entities?
DS: We believe in what the companies disclose voluntarily. However, our scoring methodology gives substantial weightage to third-party verification for which we have established a protocol. About one fifth of scoring weightage ensures data integrity which is verified by third party audit.
PG: Despite one of the lowest per capita carbon emissions our numbers add up to make us world’s third largest polluter. Any thoughts?
DS: Well, ‘lowest emitter’ is a bit of a misnomer. We inflate our denominator by hiding behind 70% of our rural compatriots who have little or no emissions.We can be clever now but at some stage this will be called out. Lifestyles in our Metro cities is no different than say China and, in some cases, closer to the European averages.
We inflate our denominator by hiding behind 70% of our rural compatriots who have little or no emissions.
In economic discussions we claim to be 5th in the world based on the cumulative figure of ~$2.8 trillion. Rather than go by different criteria we need to decide on a metric and use it consistently.
PG: With a growing middle class and rapid urbanisation – we are bound to witness steep consumerism. How do we balance growth with sustainability?
DS: There is a need to provide alternatives which will promote low carbon growth be in urban design, transportation for instance. Besides, I think the global response to the COVID pandemic will, hopefully, change, our individualistic approach. In current scenario, look at Europe or even Singapore. Car ownership is not discouraged, but it costs a fortune to drive into city centres as does parking. Our middle class takes many things for granted. There must be a combination of incentives and disincentives to keep a check on pollution and individual consumption.
There must be a combination of incentives and disincentives to keep a check on pollution and individual consumption.
PG: What is the rationale behind carbon pricing and how does it work?
DS: Carbon pricing is a risk mitigation tool which helps steer company on their low carbon path to facilitate cutting down the CO2 levels. While we do not have any carbon-tax we are moving towards a carbon constrained world which will necessitate tougher measures. There will be steady tightening of screws and evolution of best practices.
Carbon pricing is a risk mitigation tool which helps steer company on their low carbon path to facilitate cutting down the CO2 levels.
A few Indian corporates do impose a form of internal carbon tax upon themselves which creates a corpus to fund their low carbon expenditure. Having an internal carbon price promotes this understanding and creating of a pool of capital. Wipro stands out at $120 per ton of CO2 & ACC is nearly $50. This is generally used as a capex for all green initiatives.
In addition, it is vital that we get to work on educating and training accountants and CFOs and internal strategic mechanism.
PG: Do you have any interaction with the fossil fuel industry? Do they demonstrate a sense of urgency to transition towards renewables?
DS: Yes, we do but turning them is a herculean task. We produce sectoral reports on what each of the high-emitting sectors is doing include the oil & gas sector. As mentioned, we are already working with NTPC, IOC, GAIL, Tata Steel, JSW and most of the cement players. Disclosure is the first step. It has a long way to go. While the fossil fuel industry enjoys subsidies and incentives – the sooner they transition towards a low-carbon trajectory cost as well as the risk will be lower.
The writing is on the wall. We are here to help them. There will be winners and losers. Earlier, this year you saw the valuation of Tesla zoom past many established players like VW, Ford & GM. Of course, we’re in uncertain territory with COVID. However, now, as the world reorders its priorities, it’ll be prudent to address the slow, but also lethal, global threat that climate change poses.
As the world reorders its priorities, it’ll be prudent to address the slow, but also lethal, global threat that climate change poses.
PG: What is the state of our forests which can be critical as carbon sinks?
DS: We need to preserve the integrity and biodiversity of old growth forests and the wildlife. Counting plantations and monoculture as forests is not the right thing to do.
PG: What will it take to deliver on our Paris Agreement commitments?
DS: We are one of the few countries on way to meet the climate pledge. However, we need to phase out our business as usual way of power generation and manufacturing to promote green supply chains and increased deployment of renewables. This might help us to attract companies looking for alternatives as they search for spreading their supply chains out of China. Investors, especially pension funds and sovereign funds are also looking at green strategies.
This might help us to attract companies looking for alternatives as they search for spreading their supply chains out of China. Investors, especially pension funds and sovereign funds are also looking at green strategies.
It calls for incentives for low carbon; disincentives for high carbon and for policymakers to keep pace. Apart from power generation, we need to fix say public transportation; steel/cement/aluminum manufacturing and step up investments in R&D. On the individual front we all need to question desires, wants and acquisitions.
PG: Best wishes in your endeavours towards addressing the CO2 emissions and building a sustainable future.
Whatever led to Covid 2019 – there are conspiracy theories galore, evolution, mutation, climate change and more. As health workers worldwide battle with the seriously affected, another theatre opened last Monday. Along with the ICUs, laboratories carrying out Clinical Trials have joined in. Over 35 drug makers are fighting with millions of dollars at stake.
Most of the vaccine research under way globally targets a protein called ‘spike’ that studs the surface of the new coronavirus and lets it invade human cells. So, this is a race to develop a vaccine that succeeds in blocking spike – which will prevent people from getting infected.
Interestingly, researchers at the U.S. National Institutes of Health (NIH) have copied the virus’ genetic code that contains the instructions for cells to create the spike protein. This vaccine code-named mRNA-1273, was developed by the NIH and Massachusetts-based biotechnology company. Moderna Inc. encased that “messenger RNA” into a vaccine. The Seattle research institute is part of a government network that tests all kinds of vaccines and was chosen for the coronavirus vaccine study before COVID-19 began spreading widely in Washington state.
This vaccine code-named mRNA-1273, was developed by the NIH and Massachusetts-based biotechnology company. Moderna Inc. encased that “messenger RNA” into a vaccine.
The idea is to make a recipient’s body a mini factory, producing some harmless spike protein. When the immune system spots the foreign protein, it will make antibodies to attack – and be primed to react quickly if the person later encounters the real virus.
While there is no chance that the participants could get infected because the shots do not contain the coronavirus itself – Monday’s milestone marks the beginning of a series of studies in people needed to prove whether the shots are safe and could work. However, Dr. Anthony Fauci of the NIH has toned down any early expectations. According to him – even if the research goes well, a vaccine would not be available for widespread use for 12 to 18 months.
Starting what scientists call a first-in-humans study is a momentous occasion for scientists. Some of the study’s carefully chosen 45 healthy volunteers, ages 18 to 55, will get higher dosages than others to test how strong the inoculations should be. Scientists will check for any side effects and draw blood samples to test if the vaccine is revving up the immune system. Kaiser Permanente, a Health Maintenance Organisation (HMO), screened dozens of people, looking for those who have no chronic health problems and are not currently sick. Researchers are not checking whether would-be volunteers already had a mild case of COVID-19 before deciding if they are eligible.
Some of the study’s carefully chosen 45 healthy volunteers, ages 18 to 55, will get higher dosages than others to test how strong the inoculations should be.
But because vaccines are given to millions of healthy people, it takes time to test them in large enough numbers to spot an uncommon side effect, cautioned Dr. Nelson Michael of the Walter Reed Army Institute of Research, which is developing a different vaccine candidate.
There is hope also in the form of Artificial Intelligence. For instance, a supercomputer can test drug effectiveness very quickly by using machine learning and AI. The traditional drug discovery process can be notoriously lengthy. It can take 10 years for a new medicine to reach the market from the time it is discovered. Therefore, researchers are also examining the efficacy of existing drugs in treating COVID-19. “The logic is if any of these compound works, it would be much quicker than the typical drug development process to get approval and widespread use”, according to Jeremy Smith, Molecular biologist.
The traditional drug discovery process can be notoriously lengthy. It can take 10 years for a new medicine to reach the market from the time it is discovered. Therefore, researchers are also examining the efficacy of existing drugs in treating COVID-19.
Roche’s arthritis drug Actemra reportedly has the backing from Chinese authorities and has launched clinical trial. AbbVie’s HIV drug Kaletra, Japanese flu drug and China’s own homegrown drug trial is under way.
German newspaper Welt am Sonntag reported that the governments of Germany and USA are wrestling over the German-based company CureVac. It claimed that none other than the US President was offering large sums of money to German scientists working on a vaccine!
In this race to the finish, there is even an element of greed. The Intercept reports mounting pressure in the recent weeks from investment bankers on health care companies fighting the novel corona virus ‘to consider ways that they can profit from the crisis’. Gilead Sciences, the company producing remdesivir, the most promising drug to treat Covid-19, is one such firm facing investor pressure.
The Intercept reports mounting pressure in the recent weeks from investment bankers on health care companies fighting the novel corona virus ‘to consider ways that they can profit from the crisis’.
“In the past, we humans have learned to control the world outside us, but we had very little control over the world inside us”, observes Yuval Noah Harari in his seminal work 21 Lessons for the 21st Century. Will the hunt for a COVID-19 remedy lead us there? Well, as of now the focus has shifted from cyber hacking to the virus that has hacked humans!
Translation in simplified Chinese courtesy InsConsulting Team:
Climate Change and Insurers: A much desired paradigm shift!
气候变化与保险人：一个亟待发生的转变！
While insurers tend to be linear in their thinking and action – there is an element of circularity between insurance and climate change. COVID 2019 is for sure one such bender but then there is a lot more that comes in the way of the rounding! This is something embedded deep down in insurers’ DNA. Not only an element of ‘remote’ ought to counter the obsession with proximate, so does the singleminded pursuit of predictability with unpredictability. Let us look at some of the challenges that tend to act as the blind spots.
保险人在战略思维和公司运营上是“线性的”——即使用二元论的思想指导行为，但他们却忽略了保险和气候变化之间的相互作用。COVID-19就是这种相互作用的一个例证，但绝不是最后一个。这种二元论的“线性”思维深植于保险公司的骨子里：用业务的长期“远虑”以抵御风险的“近忧”扰动、永远孜孜不倦地追求事物的“可预测性”和“不可预测性”。但以下几个例子说明，二元论的盲点往往会成为保险公司的挑战。
Climate change is a cross class financial risk: Ecological disturbances such as urbanisation and deforestation together with rising temperatures as well as sea level rise are forcing wild animals closer to domestic animals and humans. Thereby exposing us to novel diseases. It is estimated that in the last few decades 60% of all recognised human diseases and 75% of emerging infectious diseases were zoonoses or transmitted from animals to humans. Corona virus is neither the beginning nor the end of it. Health and life insurers get directly impacted apart from the supply chain implications. We are also witnessing customers scrambling for coverage against Business Interruption losses emanating from cancellations and restrictions to pre-empt a Covid-2019 breakout.
气候变化是一个跨类别的金融风险：城市化和森林砍伐等活动造成了生态扰动、气温和海平面上升迫使野生动物离家畜和人类更进一步，这使得人类面临新的疾病。据估计，在过去几十年中，60%的人类公共疾病和75%的新兴传染病是人畜共患或由动物传染给人类的。冠状病毒既不是这些悲剧的开场，也不是它们的尾声。健康险和寿险公司的保险业务和上下游产业供应链受到了直接冲击。非寿险公司也迎来了为抢在新冠肺炎爆发前投保营业中断险、取消险而排起长龙的客户。
By 2100, it is projected that, stress from extreme heat and humidity will annually impact areas which are home to about 1.2 billion people worldwide (according to Rutgers University-New Brunswick, USA). This may damage the brain and other vital organs. Another big threat for both life and health insurers.
据美国罗格斯大学-新不伦瑞克分校预测，到2100年，全球约12亿人每年都将生活在极端高温和潮湿的环境压力之下，他们的大脑和其他重要器官将因此受损，从而给寿险公司带来另一个重大威胁。
While some climate deniers disagree with the fact that the intensity of bushfires in California and Australia were a result of climate change. Likewise, burning rainforests in the Amazon delta and elsewhere will have adverse implications for global climate. What does this have to do with insurance? Well, some assets in vulnerable locations prone to high frequency and high severity losses are being ‘redlined’ by insurers. Thereby attracting higher pricing and deductibles. And in some instance rendering uninsurable, as well. The full thrust of climate change on the insurance industry tends to get camouflaged under the guise of Natural Catastrophe or Act of God.
尽管一些人否认气候与自然灾害有关，但美国加州和澳大利亚的森林大火是气候变化的恶果这一事实已不容置喙。同样，此时此刻在亚马逊三角洲和其他地方燃烧着的热带雨林也会使全球气候雪上加霜。有人也许会问，这和保险有什么关系?事实上，保险公司正在对易受冲击、容易发生高频率和严重损失的地区的一些标的进行“评级”。从而提高对应保险的价格和免赔额。在某些极端情况下，保险公司也会因标的风险过高而无法承保。气候变化对保险业的全面冲击，往往伪装在自然灾害或天灾的幌子后面。
While the science of Climate Change is well established, regulators and activists have begun to challenge insurers on their investments in the fossil fuel industry. Insurers not only underwrite risks including the non -renewable energy segment which has precipitated the climate crisis – they are risk managers and particularly the ones in North America are big investors in the fossil fuel industry.
气候变化科学的发展已经日趋成熟，监管机构和气候活动家已经开始质疑保险公司在化石燃料行业投资行为的社会效益。保险公司是风险承保人（承保的风险也包括引发气候危机的不可再生能源行业的风险），是风险管理者，也是化石燃料行业的大投资者（特别是北美保险公司）。
Pollution globally kills approximately 7 million people each year. If you continue insuring polluting industries and invest in them – you are truly between the devil and the deep blue sea. Any drop in the auto sales makes insurers gloomy. Perhaps they miss out on the fact that this could be good news to their health portfolio. It’s been more than 25 years since California sued top auto manufacturers for causing Greenhouse Gas (GHG) effect. Needless, therefore, to mention the recognition of the linkage between pollution and climate change.
全球每年约有700万人死于污染。如果保险人继续为污染行业承保风险并为他们提供资金——那他们将处于进退维谷的地步。现在，新车销量的下降让保险公司感到悲观。但他们或许没意识到这可能是对于其健康险业务的利好消息——加州起诉顶级汽车制造商造成温室气体(GHG)效应已经25年了，空气污染与气候变化之间的联系不言自喻。
What till recently also sounded remote was management liability. Not only fossil fuel companies are expected to face growing class actions from a range of stakeholders, Norwegian Cruise lines is faced with a D&O lawsuit. The first such arising from Covid 2019. Dismissing this as a Black Swan event would be rather naïve. Infact the repeated strong signals of an imminent global killer pandemic breakout over the years was missed out in all the noise. The buck, therefore, ends up with the boards of responsible businesses.
“管理责任”这个词直到现在听起来离我们还很遥远。不仅化石燃料公司将面临来自众多利益相关者的集体诉讼，挪威邮轮公司（中国境内叫诺唯真邮轮公司）现在也同样面临着董事责任诉讼。有人认为这是新冠肺炎疫情导致的第一起类似案例，并将其视为黑天鹅事件，但事实证明他们太天真了。全球致命流行病爆发的强烈信号在近年来反复出现，它们却在社会的各种噪音中被忽略了。因此，责任最终只能落在了企业董事会身上。
The current risk management practices of insurers tend to be myopic. To deftly deal with Climate Change calls for both a wider time frame and imagination. Risk modeling based on a couple of centuries historical data – of a 4 billion-year-old Planet – is too miniscule for it to be predictive. Lastly, it needs to be accepted that the effect of some of the things insurers insure and invest in results in Climate Change. Howsoever seemingly remote a cause Climate Change might seem; it is increasingly turning out to be proximate to loss triggers. The starting point for insurers to cope with Climate Change calls for shedding the linearity.
保险公司目前的风险管理做法往往是短视的。要巧妙地应对气候变化，需要长远的眼光和对未来的构想。对于一个拥有40亿年历史的星球来说，仅仅基于几百年历史数据的风险建模实在微不足道，无法帮助人类掌握自然的规律。最后，一个大家不得不接受的事实是，保险公司承保或投资的标的确实导致了气候的变化。无论气候变化离保险事故的“近因”有多远，标的的出险概率已经被它潜移默化地提升了。从应对气候变化的角度出发，保险人是时候跳出“线性”思维了。
Praveen Gupta
英国特许保险学会会员
前保险公司首席执行官、气候活动家
As one of India’s largest foreign investors, it’s time for Blackstone to invest in renewables. The investments till date have been largely transactional. To be truly impactful, Blackstone needs to become a transformational player.
https://ieefa.org/blackstone-could-provide-indian-energy-security-a-strong-boost/
Ms. Hetal Dalal is the Chief Operating Officer of Institutional Investor Advisory Services India Limited (IiAS), a SEBI-registered India-based proxy advisory firm. Her role includes voting recommendations published annually by IiAS on over 800 listed companies that aggregate over 95% of the total market capitalisation on Indian exchanges. Also, the oversight of the governance research published under IiAS’ that enhances market participants’ understanding of best practices. Hetal leads IiAS’ efforts in working with International Finance Corporation (IFC) and BSE Limited on the Indian Corporate Governance Scorecard, which assesses Indian companies on their corporate governance practices. She provided oversight to the ESG assessment framework developed by IiAS: IiAS is the first domestic agency to have created such an assessment framework.
Hetal is a Chartered Accountant and holds a management degree with a specialisation in finance from NMIMS Mumbai. It was my pleasure speaking to her on a host of subjects including Women on Boards; Corporate Governance; Fiduciary responsibility; ESG and Sustainability.
Praveen Gupta (PG): Your last report Corporate India: Women on Boards was truly pathbreaking. How has been the real progress since then?
Hetal Dalal (HD): There has been a lot of progress since our 2017 report on Women on Boards. There are a greater number of women on boards and an increase in the number of directorships being held by women. Almost 45% of NIFTY 500 companies now have two or more women on their boards and there are three companies that have five women on their boards. From an overall board composition perspective, 27% of the NIFTY 500 boards have women that comprise over 20% of the board, up from 11% on 31 March 2017.
Almost 45% of NIFTY 500 companies now have two or more women on their boards and there are three companies that have five women on their boards.
The regulatory change requiring the top 500 companies to have at least one woman director has had limited incremental impact – at the time of our 2017 report, 69% of the NIFTY 500 companies already had one Independent Woman Director – on 30 November 2019, 91% of the companies have at least one woman director. Despite the improvement, India remains well behind other markets that have targeted at least women representation at 30% of board composition.
PG: ‘The plethora of well-meaning men and organisations that have sprung up to “mentor” and “train” potential women directors are more patriarchal than progressive in their prescriptions, reflecting a poor understanding of what inclusion is really about’. Any thoughts on this observation by Ms. Rama Bijapurkar?
HD: I tend to agree with all the arguments that Ms. Bijapurkar has made in her article. The quota for women is being brought to correct a generational or a systemic defect – but that does not take away the argument of meritocracy. Sure, having training is important – and even companies are required to conduct ‘familiarisation’ programmes for its directors. But, one can neither be effective nor command the respect of peers because one has simply undergone a training programme. For all directors – not just women – having their own mettle is important.
PG: While pressure is growing on fund managers to pay greater attention to environmental and social issues, is there a realisation that ESG and impact investing can generate strong financial returns as well? According to Bloomberg – nine of the biggest ESG mutual funds in the U.S. outperformed the Standard & Poor’s 500 Index last year, and seven of them beat their market benchmarks over the past five years.
HD: Several domestic funds are now focused on ESG. We believe the asset managers are clearly seeing the value of ESG, and in several instances also being compelled by their own investors / unit holders, to focus on ESG. With stewardship codes now becoming mandatory for almost all asset classes, it will propel the focus on ESG factors. While this is still relatively new for Indian markets, we believe the pace at which ESG will become a centre stage conversation will be quick.
We believe the pace at which ESG will become a centre stage conversation will be quick.
PG: Some asset managers believe that not considering ESG exposes legacy investors to uncompensated risks and may even constitute a breach of fiduciary duty?
HD: Although most of the ESG tracking seems to be in chase of long-term returns and attracting capital, there is a coterie of asset managers that believe ESG factors do expose investors to uncompensated risks. There have been ESG failures that have resulted in sharp deterioration in market capitalisation resulting in losses for investors. At the same time, there is a need for investors to be more discerning around how to proactively factor in ESG – for a large part, investors (and the market) is reactionary. Even so, I don’t think asset managers in India consider this to the extent of interpreting it as a failure of fiduciary responsibility.
PG: Do you think Climate Change is becoming an important agenda for enlightened Indian boards? Measuring Sustainability Disclosure: Ranking the World’s Stock Exchanges 2019, both Bombay Stock Exchange and National Stock Exchange of India rank 37th worldwide. How do we move up?
HD: 38 of the NIFTY 100 companies are signatories to CDP Worldwide (Carbon Disclosure Project), which shows that climate change is a focus for corporate India. However, only in 9 companies have the sustainability objectives been embedded on executive directors’ performance goals. One could conclude therefore that while climate change is being addressed through business, the focus on this at board levels is still limited.
The increasing issuances of green bonds is also testimony to the fact that not just companies, but investors too are showing an increased focus on sustainability.
The Indian exchanges consider their dominant role to be one of providing a platform for exchange. They do not pursue an agenda, believing that this may compromise their position as an unbiased market fiduciary. Therefore, the first step will be for exchanges (and perhaps the regulators) to redefine their role as influencers of Indian markets.
While climate change is being addressed through business, the focus on this at board levels is still limited.
PG: Indian Corporate Governance Scorecard framework developed by you jointly with the International Finance Corporation and the BSE – to what extent can it facilitate underwriting management liability exposures of individual corporates rated here?
HD: Our research shows that companies that score well on the CG Scorecard (score of 60 and above) have outperformance the index over a two-year period. Their stock beta (volatility) also tends to be lower than companies that do not score well on the CG scorecard. Clearly, equity markets seem to attach a premium to governance quality. Similarly, from a liability perspective, it can be interpreted that companies with a good governance score, in effect, are likely to have a lower probability of governance failures.
PG: Many thanks, Ms. Dalal. Truly appreciate these wonderful insights. My best wishes for all your endeavours.
Translation in simplified Chinese by InsConsulting Team:
The Diversity Blog 