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Aviva Blame El Nino On Climate Change

April 12, 2021
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By Paul Homewood

 

h/t Patsy Lacey.

 

 

Aviva are jumping on the climate bandwagon again!

This is written by Will Ballard, Aviva’s Portfolio Manager:

 

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In 2007, when FIFA announced Brazil would host the 2014 World Cup, President Lula da Silva saw an opportunity. Buoyed by strong commodity prices, international investment flows, an appreciating currency and low inflation, Brazil’s economy was growing at seven per cent annually and showed no sign of slowing down. Lula wanted to use the football tournament to showcase his newly prosperous nation on the international stage.

Brazil spent an estimated $12 billion on its preparations for the World Cup, with around $4 billion lavished on building or refurbishing 12 stadiums. The most egregious expense was perhaps the $300 million that went on the development of the Arena da Amazônia in Manaus, a city nestled in the Amazon rainforest. Three lives were lost in the construction of the 40,000-seat stadium, which hosted only four matches.1

This massive white elephant project was not the only policy mistake Brazil made as the tournament approached. By 2014, the government – now led by Dilma Rousseff – was struggling to balance the books. With the commodity super-cycle at an end, it was no longer able to rely on exports to fund its profligate spending. Making matters worse, President Rousseff faced a corruption investigation. Brazil’s exit from the World Cup that summer, following a humiliating 7-1 defeat to Germany, was symbolic of a sharp reversal in the country’s fortunes.

Throughout these troubles, there was one risk no-one had anticipated – a change in the weather. The early signs of El Niño were originally spotted by fishermen off the coast of South America; a reduction in the upwelling of nutrient-rich cool water in their fishing grounds meant slimmer pickings than usual. This periodic warming in sea-surface temperatures across the Pacific was to have broader climatic implications for global temperatures and rainfall.

The El Niño oscillation occurs every two to seven years, and for Brazil it means hotter, drier periods. When it fell between 2014 and 2016, the impact was unprecedented. The resulting drought caused both water and power shortages, as energy usage spiked due to greater demand for air conditioning. Hydropower stations were unable to operate due to low water levels. At one point, the four reservoirs in the Paraiba system, which supply tap water to Rio De Janeiro, dropped to one per cent of their measured capacity, their lowest-ever level.2

Agriculture accounted for over 70 per cent of water usage in Brazil, so it was no surprise the sector was badly impacted by the drought. In 2014, corn production fell by 26 per cent and sugar cane by 12 per cent. Yields of soy, one of the country’s largest exports, fell 17 per cent.3 The coffee bean crop was similarly hard hit, shrinking by eight per cent in 2014 and a further five per cent in 2015.4

Brazil had been one of the fastest-growing economies in the world; now it was suffering its worst recession since records began. Inflation spiked to over ten per cent, with food inflation peaking at 17 per cent. GDP contracted 5.5 per cent. The currency collapsed. 

 

Climate risk

The United Nations estimates 3.2 billion people live in agricultural areas that experience water shortages. The UN’s Sustainable Development Goals seek to ensure the availability and sustainable management of freshwater and sanitation for all. Despite this, freshwater resources have declined by 20 per cent per person over the last two decades, while demand is only increasing.7

What both Brazil and Turkey show us are the real-world implications of these trends for middle-income countries. And the situation in these nations is especially concerning given that extreme weather events are becoming more frequent due to climate change.


Climate change is making droughts and floods more destructive during the El Niño cycle


While El Niño and La Niña are natural phenomena, human-driven climate change worsens their effects. According to a recent study published in the Proceedings of the National Academy of Sciences in the US, climate change is making droughts and floods more destructive during the El Niño cycle.8 And yet the worst-affected countries persist with policies that damage the environment. Under its current president, Jair Bolsonaro, Brazil has accelerated deforestation in the Amazon.

Drought and water scarcity were historically seen by investors as issues only poorer countries in East Africa had to deal with. In the era of rampant climate change, this is no longer the case: middle-income economies now look vulnerable too. Recent events in Brazil and Turkey show governments that fritter away money on white elephant projects may lack the resources to react when a crisis hits, risking serious damage to their economies, markets and asset prices. Investors should take note.

https://www.investmentweek.co.uk/opinion/4028451/weather-shifts-white-elephants-climate-risk-moving-goalposts-emerging-market-investors

 

 

There may be all sorts of reasons not to invest in Brazil, but climate change is not one, as this clown would have known if he had bothered to check the data.

The value of agricultural output in Brazil has been rising at ever faster rates in recent years. Yes, there was a blip downwards during the El Nino, as has frequently happened in the past. In 2017, output recovered sharply.

As for coffee production, there have regularly been much bigger collapses in the past:

 

 chart

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http://www.fao.org/faostat/en/#compare

 

If this is the best advice Aviva can offer, I would suggest investors go elsewhere.

17 Comments
  1. Mack permalink
    April 12, 2021 10:55 am

    Despite a current world surplus in coffee production the price per pound is still 3 times higher than it was in the year 2000. In an era of ‘unprecedented extreme weather events exacerbated by made climate change’, the weather seems to be doing wonders for the market.

  2. Jack Broughton permalink
    April 12, 2021 10:55 am

    It seems like all the banks and insurers are being pressurised to show “greenness”, and this idiocy is another example of that. The pressure groups have astounding power and of course meja support. Banks and insurers first duty is to their investors and that is not a political or ecological duty.

    This is reminiscent of the idea of the Trade union / Government “partnerships”, when union leaders thought that they should decide policies, that were such a disaster for the UK’s working people in the end (zero hours contracts and a poverty-level minimum wage economy). This time it is the average investors who will suffer as UK investment-leaders follow pseudo-ethical policies.

  3. Ian Wilson permalink
    April 12, 2021 11:08 am

    I have heard David Cumming of Aviva on the BBC Today business slot proclaiming how they will cut their holdings in companies “not doing enough about climate change”.. Legal & General have made similar noises. I also wonder if their research on climate is so perfunctory whether their financial acumen is any better.

    At least you can sever business with Aviva or L & G, although it is difficult to move pensions, but spare a thought for the 9 million whose auto-enrolment pensions are with the government’s Nest. See their statement on climate https://www.nestpensions.org.uk/schemeweb/nest/aboutnest/investment-approach/How-climate-change-could-impact-your-pension. It is frankly infantile, worthy of a school project for 10-y-old children. It quotes puffins have declined 42% in 5 years due to climate change – really? due to 0.07 degree warming? Nothing to do with sandeel fishing of course.

  4. David Allan permalink
    April 12, 2021 11:13 am

    Just more virtue-signalling wokery.

  5. April 12, 2021 11:28 am

    I read the article and it appears that his position is not that el nino is caused by climate change but that its negative impacts are made worse by climate change. In his words “While El Niño and La Niña are natural phenomena, human-driven climate change worsens their effects.”

    • April 12, 2021 11:34 am

      It is curious that human impacts only ever exacerbate the natural cycle and never damp the fluctuations.

    • bobn permalink
      April 12, 2021 12:35 pm

      Correct Chaam, he’s talking unsubstantiated gibberish. No evidence whatsoever that humans have any impact on the natural El Nino / Nina cycle. Next we’ll hear that humans are changing the orbit of the moon and making tidal flooding worse. Total infantile carp.

      • subseaeng permalink
        April 12, 2021 3:29 pm

        What? We’re changing the orbit of the moon? Oh lawks a mussy, I am off to a cave in the hills to eke out a short existence on leaves and lichen. We’re doomed I tell thee! Sorry bobn, couldn’t resist.

      • April 15, 2021 1:25 am

        Brilliant. Thanks. The heart and soul of fearmongering

  6. Broadlands permalink
    April 12, 2021 1:09 pm

    El-Nino is the warming third of the ENSO cycle. La-Nina is the cooling third and “El-Nada” is the neutral third. A plot of the total monthly NINO 3.4 index against monthly Mauna Loa CO2 since at least 1982 will show that there is no statistical correlation with AGW. An entirely bogus claim to blame humans for extreme weather from an unpredictable natural event that has been taking place for eons.

  7. Tim Leeney permalink
    April 12, 2021 2:20 pm

    He’s just softening up the market so they can charge higher insurance premiums. Allowing for the extreme weather, etc. And of course the credulity pandemic.

  8. Peter S permalink
    April 12, 2021 5:33 pm

    I get fed up hearing people blame Climate Change for everything. I seem to remember the label appearing at a time when Global Warming was undergoing a significant pause and when it was claimed that weather was becoming more extreme and lists of the signs of climate change were being published everywhere.
    Today, I’m fairly satisfied that hurricanes, tornadoes, floods, draughts, sea level rise and wild fires are not getting worse. Some aspects are getting less frequent, some are very variable but have no trend and so on. Much of the climate change scare came from climate models but like much else from climate models the evidence has not materialised.
    I have not made a comprehensive study of these matters but say for argument’s sake that there is no evidence to support the term, “climate change” and its use. That would make the term meaningless and its use arguably fraudulent or a scam of some sort. It would be nice to challenge the users and tell them that their claim has no basis in science. If they mean warming, they should say so and quantify it.
    We should not let individuals or organisations make unspecified claims that are baseless and get away with it.

    • April 12, 2021 7:33 pm

      Peter-
      Re.: “We should not let individuals or organisations make unspecified claims that are baseless and get away with it.”

      Show me your data, methodology and reasoning. Repeat as required as person/organization deflects by disappearing off topic.

      But I enjoy banging my head against hard objects.

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