Client Update - 28th July 2023
It has been quite a week, with the wildfires burning in Europe and North America, Nigel Farage putting the heat on Coutts / Natwest and finally the US Federal Reserve (Fed) starting to feel more confident that inflation is coming under control. The Fed raised interest rates by 0.25% and our eyes now turn to the Bank of England next week.
It does seem ironic that private bank Coutts worried about the reputational risk of keeping Nigel Farage as a customer, when its decision to drop the outspoken Brexiter has resulted in far bigger damage to the reputation of the bank and its parent, NatWest. It has been deemed that the original decision by Coutts to “debank” the once UK Independence party leader, and the process that led to it, was misguided. When Farage challenged the reasoning, the subsequent dossier he obtained showed that the bank had commercial grounds, under its eligibility criteria, to drop Farage once he paid off a mortgage this year. But it concluded that continuing to offer banking services was not “compatible with Coutts”, given views he had expressed that were “at odds with our position as an inclusive organisation”. Group chief executive Dame Alison Rose suggested, anonymously, to certain journalists that Coutts’s move was a purely commercial decision. On Tuesday she admitted to a “serious error of judgment” in discussing Farage’s relations with the bank and subsequently resigned.
The headlines have returned, quite rightly, to global temperatures still making the headlines with the distressing events unfolding, particularly in Europe and Canada. It is important to note that extreme weather events are not new, however, they used to be viewed as rare occurrences that interrupted an otherwise relatively predictable pattern. This predictability helped provide order to how and where societies developed and operated. For example, agricultural activities would gravitate to where there was more fertile soil and dependable rainfall, and the most inhospitable locations were generally avoided. Over recent years, there has been an escalation in terms of both the prevalence and magnitude of extreme events with a seemingly constant conveyor belt of headlines announcing new records.
Many parts of the world are currently in the grip of an extreme heat wave with temperatures across southern Europe, North America and China consistently topping 40 degrees Celsius. This contributed to the 7th July being confirmed as the hottest day on record, with the average global temperature reaching 17.2 degrees Celsius. Extreme heat, particularly for prolonged periods of time, creates multiple stresses on ecosystems and society. For example, as we are currently seeing in southern Europe and Canada, the arid conditions create a tinder box environment that can lead to wildfires engulfing huge swathes of forest at an alarming rate. If extreme heat persists then this displacement can become structural, leading to mass involuntary migration. For example, Somalia is currently in a drought that has lasted five years, leading to widespread famine and forcing millions of people to move across borders in search of food.
One of the consequences of higher temperatures is that more water is evaporated and held in the atmosphere forming large cloud systems. With more extreme heat comes more extreme rain. Whilst Europe and North America contend with the heat, India is experiencing a monsoon with New Delhi receiving its largest single day downpour in over 40 years. As we saw in Pakistan last year, this has now led to flooding as the banks of the river Yamuna have breached keeping around 30 million people in their homes.
We do not need to wonder about the potential impacts of climate change because we can see and experience them now, and it is clear the environmental, social, and economic impacts are vast. As a new scientific report from World Weather Attribution released this week concludes, current events would be ‘virtually impossible’ without human activities. The long term effect may well be reconsidering how and where we live and work, how we grow food, and our management of critical resource like water. Whilst the challenges are significant and current efforts fall well short of what is needed, you hope that if human ingenuity is effectively harnessed, investment and innovation can help us mitigate and adapt to the impacts of global warming. Do have a good weekend, and good luck to the Lionesses.