INTERVIEW: ‘Hero of the Planet’  Bill McDonough calls for a rethink of carbon in the circular economy

INTERVIEW: ‘Hero of the Planet’  Bill McDonough calls for a rethink of carbon in the circular economy
Illustration by Luis Grañena
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Updated 30 August 2020

INTERVIEW: ‘Hero of the Planet’  Bill McDonough calls for a rethink of carbon in the circular economy

INTERVIEW: ‘Hero of the Planet’  Bill McDonough calls for a rethink of carbon in the circular economy
  • World-renowned sustainable design advocate explains Saudi Arabia’s leading role in global energy transition

Bill McDonough pulled no punches. “It’s a very, very serious issue. The science is clear and the signals are seriously scary. Let’s just face it,” he said during an hour-long Zoom meeting from his home in Virginia in the US.

He was talking about the threat to humanity from environmental pollution and resulting climate change, and he is well-qualified to talk about it. Called “A hero for the planet” by Time magazine, and the only recipient of the US Presidential Award for Sustainable Development, McDonough is regarded as the “father of the circular economy,” the strategy that aims to transform the lives and livelihoods of humanity — before environmental disaster does that for us.

Now McDonough has joined forces with Saudi Arabia to meet that challenge and, in particular, to determine the place of hydrocarbon fuels — the lifeblood of the Kingdom — within the coming energy transition.

“This requires massive heroic behavior. Let’s do something over the next 10 years that will astonish our children,” he said, hammering home the scale of the challenge.

That message would not be out of place in the preachings of many environmental agitators, but McDonough brings to it intellectual pedigree and a track record of pragmatic application. When he says, “I’m going to design buildings like trees,” it is much more than just a slogan.

Born in Tokyo, as a child McDonough pondered big questions like the destruction of Hiroshima by the atomic bomb, dabbling in physics, chemistry and international relations before settling on architecture as a profession.

The concept of the “circular economy” grew out of his work in regenerative building design on the “cradle to cradle” principle — the idea that human constructions should be built with future generations firmly in mind.

International recognition for his work rose steadily from the environmentally aware 1990s until publication — along with Michael Braungart — of the book “Cradle to Cradle — Remaking the Way We Make Things” in 2002.

The principles in the book were adopted by the Chinese government in its 5-year plans and by the World Economic Forum in 2014. In Davos, McDonough built a structure called the ICE House — with the help of SABIC of Saudi Arabia — to illustrate the concept of sustainable design.

That collaboration with the Kingdom was evidence of an increasingly close relationship. McDonough had earlier met Prince Abdul Aziz bin Salman, the Saudi energy minister, and found an enthusiastic listener for his ideas.

“I know this was natural to him, it was all intrinsic to his thinking. One of the most elegant parts of the dialogue is that I really enjoy working with him, talking to someone who has thought as deeply about this as he has,” McDonough said of the prince, who made energy efficiency a keystone of the Kingdom’s energy strategy.

Those conversations made him think more about the role of carbon within the circular model, which had three guiding tenets.


BIO

Born: Tokyo, 1951

Education

  • Dartmouth College,  Hanover, NH, US
  • Yale University, New Haven, CT, US

Career

  • Dean of architecture, University of Virginia 
  • Founder, McDonough Innovation
  • William McDonough & Partners
  • Relationships with several leading global universities and the World Economic Forum

Everything is a resource for something else; in nature, the “waste” of one system becomes food for another, either through biological or technical process.

Second, energy should be clean and renewable, with an emphasis on solar sources as well as wind, geothermal and other forms of energy.

Third, celebrate the diversity in local ecosystems in which design is adapted to specific circumstances in an “elegant and efficient” way.

“That is the basis of the ‘cradle to cradle’ approach — waste equals food, celebrate diversity, and use renewables, especially solar. It’s a beautiful thing,” McDonough said.

In a 2016 article in the magazine Nature, he coined the phrase that was picked up by environmental realists around the world, and especially in Saudi Arabia: “Carbon is not the enemy,” which seemed an appropriate rallying cry for a country and an economy that owes its modern development to hydrocarbons in the form of oil.

“I had this revelation when they asked me to work on it, because this is actually super-important. Carbon is actually a material in the circular economy, but it’s also a fuel, which is very unusual, so it deserves special attention. We decided to start working on this with the Saudis,” he said.

The relationship with SABIC went back to 2015, but he found his services much in demand as plans for the megaprojects of the Vision 2030 strategy advanced. He became an adviser to the Red Sea Development Company, the Royal Commission for AlUla, and for the Al-Soudah project run by the Public Investment Fund, as well as a member of the higher council of NEOM, the huge urban development planned for the Kingdom’s northwest.

Earlier this year, McDonough became an adviser and collaborator with the King Abdullah Petroleum Studies and Research Center in Riyadh, and delivered one of the keynotes for the Kingdom’s Energy Ministry at the G20 energy meeting in March.

His thinking crystallized. “The problem is not carbon — the problem is us. Carbon is an innocent element, and like I pointed out, there is the sun, there is carbon in the atmosphere, and then there is the soil, also carbon. If you say you want to be carbon free, think about it — are you saying to want to decarbonize yourself? Impossible,” he said.

He classes carbon into three kinds, and has an intricate set of slide illustrations to emphasize the point. “Living carbon,” which is an essential ingredient to human life and the basis for all agriculture. “It’s a positive thing to want to make more living carbon,” he said.

Then there is durable carbon, which is also a positive when it is an enduring form, like a building, or a city, or — the example he gave — a piece of paper, which can last for centuries in the form of a book.

Then there is the third kind — “fugitive” carbon — which he called “the big whoops.” This is the form that escapes into the atmosphere during industrial, transportation and manufacturing processes, or is washed up on a shoreline as plastic waste.

“It’s probematic to have durable carbon go fugitive,” he said.

It almost goes without saying that McDonough is a firm believer in the various international accords, especially the Paris agreement on climate change, that seek to limit, and even reverse, environmental damage by controlling output of “fugitive” carbon into the atmosphere, and these limits are built into all his models. “We have to work within those limits,” he said.

The main solution to fugitive is the process known as CCUS — carbon capture, utilization and storage — which has also become a major plank of the Kingdom’s energy strategy. CCUS techniques are implemented by Saudi Aramco and in NEOM. “What’s going on at NEOM is phenomenal and magnificent, because they’re planning on running on 100 percent renewable power,” he said. “All of a sudden they’re going to be making hydrogen with electrolysis. So we’re going to have what we call ‘green hydrogen,’ which is a magnificent prospect for the human future,” he said.

McDonough does not like the term “fossil fuels,” which he says encourages the idea that the only use for hydrocarbons is to burn them; nor does he like the phrase “hydrocarbon resources.” “Let’s just call them sources that we get from nature,” he said.

Just as important, fugitive carbon can be transformed into a variety of materials, like plastics and polymers, that are essential for human life. 

McDonough said that the work of SABIC, the Saudi petrochemical group now owned by Aramco, in this regard was “especially important.” 

Nor is McDonough a fan of those on the extreme wing of the environmental movement who say the world should stop using hydrocarbon fuels completely.

“I think the big picture for all of us in terms of social benefit, and intelligent behavior and design is that we do want inexpensive energy for everyone so they can make their lives better. We just don’t want to destroy the atmosphere,” he said.

The challenge is to meet the environmental standards most countries agree are necessary to prevent the warming of the Earth by more than 2 degrees Celsius above pre-industrial levels by the middle of the century, and McDonough believes there has to be a unified commitment on the part of humanity to meet this essential target.

McDonough has worked with the US space agency NASA on building design, producing some of the most advanced and environmentally friendly constructions in the world. “President Kennedy famously said we were going to do a moonshot, and within 10 years man was walking on the moon. I’d like to do an Earth shot. 

Let’s put Mars off for a little bit. Before I go to work on the red planet, can I come back to the blue one?” he said.

Does he think humanity can get there by 2050 and pull itself back from the brink of climate catastrophe? “I think so. I think we  have to,” he said.


Jordan public debt reached 85% of GDP in 2020

Jordan public debt reached 85% of GDP in 2020
Updated 8 sec ago

Jordan public debt reached 85% of GDP in 2020

Jordan public debt reached 85% of GDP in 2020
RIYADH: Jordanian public debt surged by 10.6 percent in 2020 to 26.50 billion dinars ($37.4 billion) as the government spent heavily to support its economy during the COVID-19 pandemic.

Jordan’s public debt ended 2020 at 85.4 percent of GDP, up from 75.8% a year earlier, according to Ministry of Finance data. The ministry recently changed its methodology for calculating public debt, excluding obligations from the Social Security Investment Fund, which amounted to 6.67 billion dinars.

The Hashemite Kingdom’s internal debt was 12.78 billion dinars last year, while external debt stood at 13.72 billion dinars, Ministry of Finance data show.

Unemployment rose to 25 percent in the fourth quarter of 2020, with youth unemployment reaching 55 percent, according to International Monetary Fund data.

Jordan responded “quickly and decisively” in its support of the economy during the COVID-19 pandemic and is making progress on its program of economic reforms, IMF Managing Director Kristalina Georgieva said on Monday in a statement to mark the kingdom’s 100th year.

“Timely and targeted fiscal measures have helped protect jobs and the vulnerable, while equitable tax reforms – aimed at tackling evasion, closing loopholes, and broadening the tax base – have helped maintain debt sustainability,” Georgieva said.

However, the country must address high unemployment to deliver durable, jobs-rich and inclusive growth, she said.

Saudi Re aims to boost capital to fund domestic, overseas expansion plans

Fahad Al-Hesni, managing director and CEO of Saudi Re. (Supplied)
Fahad Al-Hesni, managing director and CEO of Saudi Re. (Supplied)
Updated 24 min 53 sec ago

Saudi Re aims to boost capital to fund domestic, overseas expansion plans

Fahad Al-Hesni, managing director and CEO of Saudi Re. (Supplied)
  • Despite a difficult year in 2020, Saudi Re recorded SR 60.7 million in net profit before zakat, an increase of 2 percent year-on-year

RIYADH: The Saudi Reinsurance Company (Saudi Re) on Thursday announced plans to increase its capital in order to fund its expansion plans.

Saudi Re’s board recommended increasing the company’s capital from SR 810 million ($216 million) to SR 891 million and converting SR 81 million of retained earnings into capital, giving the company an extra SR 162 million to finance its expansion plans.

Fahad Al-Hesni, managing director and CEO of Saudi Re, said in a statement: “The capital increase will strengthen Saudi Re’s capital base and support the expansion plans in the domestic and international markets. The board’s recommendation comes in line with Saudi Re’s effort to generate better returns and create a greater shareholder value.”

Despite a difficult year in 2020, Saudi Re recorded SR 60.7 million in net profit before zakat, an increase of 2 percent year-on-year.

At the same time, total assets increased 7 percent to SR 2.8 billion and total gross written premiums (GWPs) increased 18 percent to SR 935 million. International business made up the bulk of the GWP growth — up 25 percent year-on-year — while domestic business increased 8 percent.


Turkish central bank holds rates, drops policy pledge under new chief

Turkish central bank holds rates, drops policy pledge under new chief
Updated 42 min 25 sec ago

Turkish central bank holds rates, drops policy pledge under new chief

Turkish central bank holds rates, drops policy pledge under new chief
  • Lira slips 0.7% on announcement
  • Inflation could reach 19% before mid-year

ISTANBUL: Turkey’s central bank held rates steady at 19 percent as expected on Thursday and dropped a pledge to tighten policy further if needed, in its first decision since President Tayyip Erdogan fired the hawkish former governor and sparked a market selloff.
In a statement, the bank also ditched last month’s pledge to “decisively” maintain a tight monetary policy “for an extended period” to address inflation, which has risen above 16 percent and been in double-digits for most of the last four years.
The lira slipped as much as 0.7 percent to 8.125 versus the dollar after the bank under new governor Sahap Kavcioglu replaced the hawkish guidance with a softer assessment of risks to inflation that analysts said signaled interest rate cuts were on the way.
Erdogan’s shock removal last month of Kavcioglu’s predecessor Naci Agbal, a respected policy hawk, sent foreign investors fleeing from Turkish assets on concerns that rates would be quickly slashed.
But Kavcioglu — who had previously criticized Agbal’s rate hikes — has since promised no abrupt changes. Those assurances as well as the more-than 10 percent lira selloff had convinced analysts that policy would remain steady for now.
The central bank said it maintained a tight stance in the face of lofty inflation expectations, adding rates would remain above inflation until it is clear that price pressure is easing.
John Hardy, FX strategy head at Saxo Bank, said the currency had weakened on Thursday because Agbal’s pledges were scrapped.
“Any daylight they see, they are going to want to cut rates. Holding them here (today) is just an acknowledgment they can’t get away with it for now,” he said.
In a Reuters poll, most economists had predicted no change to the one-week policy rate this week, but saw easing from around mid-year, to settle at 15 percent by year-end.
Last month, the central bank under Agbal had raised rates by a more-than-expected 200 basis points to levels last touched in mid-2019 to dampen inflation and support the currency.
Before taking the job, Kavcioglu had said such a policy was wrong for Turkey and also espoused Erdogan’s unorthodox view that high rates cause inflation.
Erdogan has repeatedly called for monetary stimulus to help the economic rebound. He has fired three bank chiefs in two years, eroding monetary credibility.
The lira plunged 15 percent immediately after Agbal’s dismissal before a rebound, and foreign investors dumped the most bonds and stocks in 15 years over the following week.
Depreciation boosts inflation via imports, delaying any rate cut plans, analysts say.
Inflation is expected to reach as much as 19 percent before mid-year. Yet few analysts see another rate hike given Erdogan’s repeated calls for stimulus — including one this month for single-digit rates.
The change in tone under Kavcioglu reflects “preparation being made to cut the policy rate,” said Haluk Burumcekci of Istanbul-based Burumcekci Consulting.
Ratings agencies say premature easing could again hammer the lira and raise risks of a balance-of-payments crisis given Turkey’s depleted FX reserves and its $160 billion in short-term foreign debt.
Citing sources, Reuters reported Erdogan ousted Agbal in part because he was uncomfortable with the bank’s investigation into some $128 billion in FX sales undertaken during his son-in-law Berat Albayrak’s stint as finance minister.


Emirates begins trials of IATA’s digital travel pass

Emirates begins trials of IATA’s digital travel pass
Updated 15 April 2021

Emirates begins trials of IATA’s digital travel pass

Emirates begins trials of IATA’s digital travel pass
  • Passengers from Dubai to Barcelona on flight EK 185 on Thursday trialed the travel pass

DUBAI: Dubai carrier Emirates airline has started testing the COVID-19 digital travel pass, a mobile application that will help passengers manage their necessary travel requirements amid heightened security due to the pandemic.

Passengers from Dubai to Barcelona on flight EK 185 on Thursday trialed the travel pass, according to a company statement.

“The ability to process passengers’ COVID-19 relevant data for travel digitally will be the way forward,” Adel Al-Redha, chief operating officer of Emirates, said, as the global aviation industry slowly gets back up from the pandemic slump.

The airlines partnered with the maker of the travel pass, the International Air Transport Association (IATA), to integrate the standardized process of verifying documents such as COVID-19 rest results and vaccination certificates into the airline’s operations.

The trial is ongoing on selected Emirates flights from the Dubai to Barcelona and London Heathrow to Dubai, and will be expanded soon to include other routes, the company said.

Other airlines in the region have teamed up with IATA to conduct trial runs of the application, including Saudi Arabia’s Saudia and Abu Dhabi’s Etihad Airways.


Moody’s warns on ESG risks for some structured finance assets

Moody’s warns on ESG risks for some structured finance assets
Updated 15 April 2021

Moody’s warns on ESG risks for some structured finance assets

Moody’s warns on ESG risks for some structured finance assets
  • Sustainable investing has become a hot topic in Gulf markets over the last year with increased awareness in part springing from the coronavirus pandemic

DUBAI: Changing regulations and consumer demand driven by environmental, social and governance (ESG) issues means that some structured finance asset classes are riskier than others, according to Moody’s Investors Service.

Aircraft and tobacco asset-backed securities (ABS) as well as project finance and infrastructure collateralized debt obligations (CDOs) have “moderate vulnerability” to environmental risk, while most other asset classes have “low” environmental risk, Moody’s wrote in a report.
Student loan asset-backed securities are the only structured finance sector with “high” social risk, it said.
“Environmental and social risks vary across structured finance asset classes, reflecting the sector’s diverse array of transaction types and assets,” according to Moody’s Vice President Inga Smolyar. “Governance considerations, in contrast, are generally issuer specific.”
Sustainable investing has become a hot topic in Gulf markets over the last year with increased awareness in part springing from the coronavirus pandemic. Demand for ethical and sustainable investments is now on the rise and increasingly being adopted by a wide range of investors from socially aware individuals to family offices and sovereign wealth funds.
The Future Investment Initiative Institute’s “The Neo-Renaissance: Mobilizing ESG for a Sustainable Future” conference takes place online today between 3.30 p.m. and 5.30 p.m. Riyadh time.
Several high profile regional business leaders are due to speak at the event including Saudi Arabia’s Public Investment Fund Governor Yasir Al-Rumayyan who also chairs the institute.