Facebook Instagram Linkedin Twitter Youtube
Home Blog Page 7113

China goes on pricey US corn shopping spree amid thin supply at home

FORT COLLINS, Colo. — China had been relatively quiet in the US corn market since its record buying streak last summer, but a string of much more expensive bookings this week would seem to be proof of the country’s dire need for the yellow grain.

No one knows exactly how big China’s corn stockpiles are, but the sudden deficit of usable grain in the country appears to have manifested in rising prices, extremely active state corn auctions and record imports.

The US Department of Agriculture (USDA) this week confirmed three separate sales of US corn to China for delivery in the 2020-21 year that ends on Aug. 31. Those sales total 3.74 million tons, or 147 million bushels.

One of those bookings, the 1.7 million tons announced on Thursday, is the sixth-biggest single-day sale of US corn in records back to 1977. Two of the July 2020 sales to China sit in the top five.

Frequent, large daily sales announcements, or flash sales, of US corn to China became common last July. But prior to this week, there had not been one explicitly to the Asian country since the 420,000 tons confirmed on Oct. 14.

Many analysts assumed China was sitting out due to high prices. By mid-October, US corn prices had risen at least 25% since Aug. 1 to the highest levels in more than a year. As of mid-October, year-end US corn supplies were seen 40% higher than the current expectation.

US prices are now around 30% above the mid-October levels and about 65% higher than on Aug. 1. But on the export front and compared with competitors, the US product is still the best deal around.

INTRIGUING POSSIBILITIES
Chinese corn prices started rallying in early 2020, before the US ones. Midway through last year, corn prices in China were up 15% on the year, reaching a 40% gain in mid-October. Dalian corn futures reached all-time highs earlier this month, up 50% from a year earlier, though they have backed off a bit since then.

But even as both have rallied, Chinese corn prices are about double the US ones and are trading at a premium not seen since Beijing in 2015 cut minimum price supports for Chinese corn farmers, before later eliminating them altogether.

China’s willingness to book so much US corn despite the high prices not only suggests the corn is needed, but it also opens a wide range of possibilities on the trade front. How much more corn does China need? Will it buy substantially more than anyone expected?

In terms of marketing year exports, US shipping capacity will somewhat limit the amount of corn that can reasonably go out by Aug. 31. March through June is when US corn shipments tend to reach their maximum, and this period should be especially busy this year given the historically slow pace of shipments versus sales.

USDA’s Beijing attaché this week maintained 2020-21 China corn imports at 22 million tons, some 4.5 million above USDA’s official estimate. Others see even higher possibilities, such as consultancy AgResource, which this week pegged that number at about 25 million-27 million tons.

AgResource and other firms have suggested China’s corn import demand will likely grow in the coming years.

RECORDS FALLING
Since mid-October, weekly corn sales to China have been light compared with volumes from previous weeks and months. Other commitments have chugged along at a steady pace since then, generally reaching at least average levels in most weeks.

As of Jan. 21, US corn bookings covered 75% of USDA’s record 2020-21 export forecast of 64.8 million tons (2.55 billion bushels), comfortably ahead of normal. But adding in this week’s flash sales, which total 4.06 million tons and include two sales to unknown destinations, boosts the percentage sold to at least 81%.

That is assuming that none of this week’s flashes were included in last week’s sales total. If they are all included in the current week’s total that will be reported next Thursday, it would make for a record weekly volume in net corn sales, old-crop plus new-crop, since at least 2008.

Whenever accumulated sales grow this large, there is always a risk of some cancellations. That could derail the impending weekly sales record, though there is no specific reason to believe cancellations were prominent this past week.

It is interesting to note that back in 2013-14, US corn export sales to China neared record levels early in the marketing year, though a large portion of those orders were eventually cancelled.

USDA earlier this month reduced the 2020-21 US corn export target by about 2.5 million tons based on smaller supplies. Given this week’s huge flashes, the agency is likely to face scrutiny from market participants if it does not raise the number in its next report due on Feb. 9. —  Reuters

How PSEi member stocks performed — January 29, 2021

Here’s a quick glance at how PSEi stocks fared on Friday, January 29, 2021.

Peso may falter as market sees faster inflation

THE PESO will likely retreat this week due to safe-haven demand for the greenback caused by expectations of quicker January inflation.

The local unit closed at P48.08 per dollar on Friday, appreciating by three centavos from its P48.11 finish on Thursday, data from the Bankers Association of the Philippines showed.

However, it was nearly unchanged from its P48.085-per-dollar close a week earlier.

The peso climbed on Friday following the rebound of US stocks overnight.

This soothed market fears from previous days caused by hedge funds selling long positions to cover shorts in relation to the “Reddit rally” that fueled shares of GameStop and other volatile stocks.

Meanwhile, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the peso saw some weakness last week on market cautiousness amid a possible delay in a proposed US stimulus.

This week, the market will mainly move in anticipation of January inflation data due on Friday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

A BusinessWorld poll of 16 economists last week yielded a median estimate of 3.6% for January headline inflation, with economists citing higher food and oil prices. The median is closer to the higher end of the 3.3% to 4.1% estimate given by the Bangko Sentral ng Pilipinas (BSP) for the month as well as its 2-4% target for the year.

If realized, January would mark the fourth consecutive month of quicker inflation as this will be faster than both December’s 3.5% and the 2.9% print in January 2020.

UnionBank’s Mr. Asuncion said safe-haven demand for the dollar may cause the peso to depreciate this week, as dovish signals from the US Federal Reserve last week were not enough to calm the market amid lingering economic concerns.

The Fed last week maintained its key policy rate near zero and assured it will keep providing support until a rebound from the recession becomes more solid.

Mr. Ricafort expects the peso to move within P48.03 to P48.13 versus the dollar this week, while Mr. Asuncion sees a wider trading band of P48.05 to P48.25. — L.W.T. Noble with Reuters

Stocks may fall before January inflation report

SHARES are projected to decline in the upcoming trading week as investors await the upcoming release of January inflation data.

The bellwether Philippine Stock Exchange index (PSEi) closed at 6,612.62 on Friday, lower by 239.22 points or 3.49% from the previous trading session.

Week on week, the PSEi’s close on Friday was lower by 433.21 points or 6.15% from its 7,045.83 finish on Jan. 22.

The market’s average value turnover for the week fell 18.1% to P10.39 billion, while average net foreign selling expanded to P1.33 billion.

Timson Securities, Inc. Head of Online Trading Darren Blaine T. Pangan said in a mobile phone message that the market is expected to decline as investors await the release of January inflation data on Friday.

The Bangko Sentral ng Pilipinas last week said the country’s headline inflation likely settled within 3.3% to 4.1% in January due to the higher prices of fuel, power rates, and food products such as pork and chicken.

Regina Capital Development Corp. Head of Sales Luis A. Limlingan said the market’s movement in the upcoming week will depend on any fourth quarter earnings reports of companies.

“Support at around 6,500 level might be put to a test this week as the market’s bearishness continues to strengthen as momentum mimics the rise in selling pressure,” Mr. Limlingan said in a mobile phone message.

“If the support gets breached, investors might see this as a bargain hunting opportunity,” he added.

Diversified Securities, Inc. Equity Trader Aniceto K. Pangan said the market is seen moving sideways this week amid the release of income reports.

“The market is seen to move sideways with immediate support at 6,517 while resistance at 6,740,” Mr. Pangan said in a mobile phone message.

Timson Securities’ Mr. Pangan said the index may move lower and try to establish a firmer base on its nearest support at the 6,500 area.

“If this doesn’t hold, next support would be at the 5,800 level where it previously consolidated,” Mr. Pangan said.

The benchmark index closed lower last month as market sentiment was affected by the ongoing spread of the coronavirus disease 2019 (COVID-19) in the country and around the world.

Compared with the previous month, the PSEi’s finish for January was lower by 527.09 points or 7.38% from the 7,139.71 close in December.

Mr. Pangan said the market started 2021 on a positive note, but faltered at the latter part of January.

In mid-January, the Philippines reported its first case of the new COVID-19 variant — first detected in Britain — in a 29-year-old Filipino male who arrived from the United Arab Emirates.

Since then, the country also confirmed the local transmission of the British COVID-19 variant in Bontoc, Mountain Province. — Revin Mikhael D. Ochave

Energy dep’t seeking to launch green energy auction in June

By Angelica Y. Yang

THE Department of Energy (DoE) said it seeks to launch an auction for green energy suppliers by June to determine how much volume from renewable sources the market is willing to absorb.

The green energy auction is open to qualified renewable energy (RE) developers seeking to supply their output, and could allow consumers to access green electricity at potentially below-market prices.

“The Department of Energy remains committed to its mandate under the Department Circular 2020-07-0017 (which that laid down the guidelines for conducting the green energy auction) and to launch as planned the first green energy auction by June this year,” Assistant Secretary Redentor E. Delola told BusinessWorld by e-mail Friday.

In July, the circular outlined how the green energy auction is to be conducted, one of its objectives is to help power providers comply with the renewable portfolio standards (RPS) program. The RPS requires distribution utilities to meet a quota from power provided by qualified RE facilities.

RE projects eligible for the green energy auction are those covered under the RPS. For on-grid areas the qualified participants can be from the biomass, wind, solar, hydro, ocean, geothermal, and waste-to-energy industries.

On Friday, Mr. Delola said that the DoE was still determining the volume to be auctioned for the first auction.

“In terms of accounting for the volume that distribution utilities are planning to buy, the DoE is still in the process of completing the required technical parameters… For instance, there is a need to collect and aggregate data such as load profiles and energy volumes to determine the mandated participant’s total supply volume,” Mr. Delola said.

He said that the DoE hopes to complete the data collection stage “at the soonest possible time.”

“The GEAC (Green Energy Auction Committee) is also coordinating with the regulator on the GEAR (Green Energy Auction Reserve) Price determination,” Mr. Delola said.

The GEAC is the composite team in charge of the auction. The GEAR refers to the maximum price offer in pesos per kilowatt-hour, as set by the ERC (Energy Regulatory Commission).

In July, Mr. Delola said that the department intended to hold the auction in 2021, pending an estimate of the volume that utilities are looking to purchase.

The president of the Biomass Renewable Energy Alliance, Inc. Don Mario Y. Dia, has said that the process of supplying RE to consumers who express a preference for green sources of energy should give priority to projects that did not make it to the feed-in tariff (FiT) scheme.

The FiT is a fixed subsidy given to eligible RE developers by the government, as a means of encouraging RE investment.

Barriers to entry seen limiting growth of local logistics industry

THE competitiveness of the logistics industry has been hampered by rules limiting market entry, according to a joint report issued by the Organisation for Economic Co-operation and Development (OECD) and the Philippine Competition Commission (PCC).

The report, released Friday, said other competition issues in logistics include exemptions from competition law and rules allowing preferential treatment for certain companies.

The Philippine logistics market was estimated at $11 billion, equivalent to 4% of gross domestic product.

The OECD made 99 recommendations to improve competition in the sector after studying 96 laws and regulations in its report, which was funded by the British government.

The organization said there should be a single regulator in charge of freight forwarders, with clear separation between regulatory bodies and operations.

“Regulatory bodies should avoid being operators themselves that compete with private firms in a sector they regulate,” according to a summary of the findings provided by the PCC.

The OECD also supported amendments to the Public Service Act, which would remove logistics from being classified as a public utility subject to limits on foreign participation.

Domestic firms are also preferred for contracts in public bidding, as they are awarded contracts even if they exceed foreign bids by up to 15%.

“Eliminate preference for nationals where foreigners are allowed to participate in procurement processes to ensure that the most competitive bid is chosen,” according to the report. “If necessary, implement a transition period. Direct subsidies could be considered if the aim is to help develop national industries.”

The lack of roadworthiness standards and conflicting road-use policies, according to the report, were a source of uncertainty impeding market entry.

“Anti-competitive regulations that hinder market entry and expansion may be particularly damaging for a country’s economy as they reduce productivity growth, limit investment and innovation, harm employment creation, and may favor certain firms over other firms and consumers, with consequences for income inequality,” according to the report.

“A competitive logistics industry is vital to recovery and key to increasing consumer welfare in the new normal, especially with the rise of digital commerce in bridging supply and demand in our markets,” PCC Chairman Arsenio M. Balisacan said.

OECD Deputy Director for Financial and Enterprise Affairs Antonio Gomes said that the recommendations are about improving the investment and jobs environment.

“There is a need to reduce unnecessary legal and regulatory restrictions to competition, thus bringing prices down, and improving the quality of goods and services and increasing innovation,” he said.

The demand for logistics space in the Philippines is expected to grow by 160,000 square meters per year over the next decade due to a spike in e-commerce demand, JLL Philippines estimated last year. — Jenina P. Ibañez

Palace urged to greenlight legislation to expedite Bayanihan III passage

By Kyle Aristophere T. Atienza

THE GOVERNMENT needs to consider enacting a third stimulus package as a means of increasing incomes at a time of rising food prices, analysts said Sunday.

Emmanuel J. Lopez, dean of the Graduate School of Colegio de San Juan de Letran, said President Rodrigo R. Duterte must set the tone for his key allies in the Congress to focus the next package, which will likely be known as Bayanihan III following the naming conventions adopted in the first two rounds, on providing aid directly to the people.

Instead of imposing price controls, “the government should instead introduce a natural stimulus package that will create or augment incomes,” he told BusinessWorld in an e-mail.

He said the government should extend assistance to the hardest hit sectors.

Congress last year passed two laws ensuring funding for coronavirus response measures worth hundreds of billions of pesos, overriding the caution recommended by economic managers, who wanted to preserve the government’s resources in the event of a long pandemic.

Republic Act (RA) No. 11469 or the Bayanihan to Heal as One Act (Bayanihan I) reallocated about P275 billion of the 2020 budget for an emergency subsidy program, while RA 11494 or the Bayanihan to Recover as One Act (Bayanihan II) provided P165.5 billion for measures to boost the economy. A Palace declaration of priority status for such measures will remove some procedural hurdles to their passage while likely mobilizing the President’s Congressional allies.

“Meaningful stimulus is possible if the economic managers stop fetishizing creditworthiness and infrastructure and are willing to start raising wealth and income taxes on the rich,” Sonny A. Africa, executive director of IBON Foundation, told BusinessWorld via Facebook messenger.

He said a fresh stimulus program should include substantial emergency cash subsidies to increase household incomes and substantial agricultural support to raise productivity and lower food prices.

The House economic affairs committee in late 2020 created a technical working group to reconcile two bills in the House calling for a Bayanihan III law.

House Bill (HB) No. 8031, or the proposed Bayanihan to Arise as One Act, provides for an additional P400-billion stimulus package to help people deal with the challenges brought about by the pandemic, as well as the series of typhoons which hit the country in late 2020.

HB No. 8059, or the proposed Bayanihan to Rebuild as One Act, on the other hand, seeks to provide P247 billion to emergency response and economic recovery programs.

Asian Institute of Management Economist John Paolo R. Rivera said policymakers should “assess first the effectiveness of Bayanihan I and II” before dealing with a Bayanihan III.

“Has it been fully disbursed? What worked best and did not work? How can delivery be improved?,” Mr. Rivera asked. “All of these are also important to know because these will justify urgency,” he said.

Maria Ela L. Atienza, a political science professor at the University of the Philippines, said legislators and state auditors “should see first if these packages actually achieved their goals or if they worked before enacting new ones.”

“The administration cannot simply use public funds or get fresh loans if they have not accounted (for them) properly for previous spending,” she told BusinessWorld in an e-mail.

The House of Representatives is set to bring a number of major bills, including the proposed legislation amending the 33-year-old Charter, to the plenary by February. The Congress adjourns sine die in June.

Mr. Lopez said the President must keep his focus on pandemic-related aid or risk hurting the chances of his anointed presidential candidate.

Ms. Atienza said the administration’s response to the pandemic and the state of the economy will be some of the considerations when voters “evaluate whoever will be the anointed administration candidate in the 2022 presidential elections.”

“However, there are many other factors that can improve or hurt the chances of any presidential candidate, including whether there are other strong contenders, candidates’ personalities or at least how people perceive them which tend to be the basis of many voters in the absence of strong, programmatic political parties, media exposure, among others,” she said.

Budget for Dubai Expo PHL pavilion reduced to fund pandemic response

By Jenina P. Ibañez, Reporter

THE BUDGET for the Philippine pavilion at the rescheduled World Expo in Dubai has been cut after the government repurposed funding in favor of the coronavirus disease 2019 (COVID-19) containment effort.

Construction of the Philippine pavilion is around 93% complete, with the Trade department aiming to finalize works in August.

“Owing to the novel coronavirus (COVID-19) pandemic, which has been declared a global health emergency by the World Health Organization, the Philippine Government has adopted major realignments in budgetary allocations for fiscal years 2020 and 2021,” the Trade department said in an e-mail.

“This shift in priorities and changes in National Government policies has determined corresponding adjustments in the Philippines’ Expo 2020 Dubai preparations.”

The department did not elaborate on the new budget. Initial spending was at an estimated P800 million to build and maintain the “Bangkota” pavilion and promote Philippine creative goods at the six-month event.

Creatives working on the pavilion said that the shifted timeline worked to their advantage after organizers of the 192-nation expo rescheduled it for an October 2021 start instead of 2020 in response to pandemic-related constraints.

Lucille Ong, owner of the Dubai-based Al Shomoos Landscaping and Gardening LLC, said that the longer preparation period helped improve the landscaping of the pavilion.

“We planted the trees in September. So by the time the pavilion opens, the plants will be relaxed,” she said in an online video interview.

“(Our work) has to be adjusted because the contractor kept the same schedule. And we have to follow the schedule of the contractor because they’re the ones giving us the space.”

BUDJI+ROYAL Architecture+Design President and Chief Executive Officer Royal Pineda said in an online video interview that public health-related restrictions did not create long construction delays for the Philippine pavilion compared to those of other countries.

The architecture and design firm had been working on what Mr. Pineda calls a “practical luxury” option — a less costly pavilion, using Dubai-based materials and technology instead of imports.

“Some countries were delayed because of importation,” he said, explaining that the Philippine team used the extra time to refine some design work, including the animations for exhibits inside the pavilion halls.

“What was also critical and how it affected us is there was some slashing of the budget, because I think of course the government was also very careful and prudent during the pandemic time and we understand that.”

The furnishings, for example, were reduced.

“That also triggered us to be even more creative… with the limitations, you really have to make it work and that I think is a good challenge for designers,” he said.

Structural and safety-based construction works were prioritized under the budget, Ms. Ong said.

“For me, it doesn’t matter… We will fill whatever looks better. Afterwards — after we’ve planted everything that is on the official list, then we will add to make it look lush. It’s not about the cost.”

Due process not followed in FiT adjustment, NGO claims

CONSUMER RIGHTS advocacy group Laban Konsyumer, Inc. (LKI) has sought to nullify an Energy Regulatory Commission (ERC) resolution to adjust the feed-in tariff (FiT) allowance, claiming that it was issued without the required notice and hearing in violation of procedural due process.

The FiT is a fixed subsidy paid by the government to renewable energy (RE) developers to partially compensate for the risk in taking on new technology. The subsidy costs are passed on to consumers via the FiT-All uniform charge.

Last year, the FiT rate for solar projects increased to P11.2758 per kilowatt-hour (kWh) from the P9.68/kWh set in 2014. Meanwhile, the FiT for wind projects increased to about P9.8976/kWh last year from P8.53/kWh.

The LKI, in its petition, questioned the ERC resolution issued in May 2020.

According to a copy of the petition obtained by BusinessWorld, due process was not observed because the resolution was “solely based” on the information given by two groups of RE developers, the Developers for Renewable Energy Advancement and Wind Energy Developers Association of the Philippines.

“The other stakeholders of the power industry like the distribution utilities, other market participants or generation companies, electric cooperatives and consumer groups were deprived of due process of law to participate in a public hearing mandated by the Electric Power Industry Reform Act (EPIRA), FiT Rules and the ERC RPP (Rules of Practice and Procedure) on a matter of public interest,” according to the petition.

LKI also said that electricity consumers stood to be affected by the adjustments of the FiT rates.

The petition also claimed the absence of a quorum as one ERC member did not take part in the signing, and two others retired from office while the resolution was not in effect.

SunAsia Energy, Inc. Chief Executive Officer Tetchi Cruz-Capellan told BusinessWorld that she believed that “all RE developers placed their trust in the sanctity of the contract when they invested in plant construction.”

“If we change the rules after the plants have been built, and after the wholesale market prices have benefitted (from) lower power cost due to the low prices dispatched by solar at daytime peak, how will investors — both foreign and local — recover their capital expenses? How do we expect them to invest in infrastructure in the future if we do not respect the terms of the contract? These are the issues we need to think about.” Ms. Capellan said.

She said the idea that power rates will increase solely due to RE is a “false narrative.”

“With or without RE, power rates will increase to account for adjustments in O&M (operations and maintenance) cost,” she said.

Asked for comment, LKI President Victorio A. Dimagiba, who filed the petition, said that no rules were being changed.

“Exactly, (the) LKI petition (would) apply to the existing rules,” he told BusinessWorld in a Viber message.

He maintained that the FiT adjustments in wind and solar last year contributed to a rise in consumers’ power bills as the National Transmission Corporation recovered the allowance paid by consumers.

Meanwhile, ERC Commissioner-in-charge Floresinda G. Baldo-Digal told BusinessWorld in a text message Friday that the commission will announce the schedule of the hearing on the petition by this week. — Angelica Y. Yang

Digitalization, EAGA trade named Davao business chamber’s top priorities

DAVAO CITY’S business leaders are looking to regain the growth momentum lost last year due to the coronavirus pandemic, with digitalization and stronger trade ties in the sub-regional grouping known as the East ASEAN Growth Area (EAGA) among the priorities.

“The economies of Davao and Mindanao need to recover the lost ground and momentum they had before the pandemic,” said Maria Lourdes G. Monteverde on Friday after formally taking the helm as this year’s president of the Davao City Chamber of Commerce and Industry.

Davao Region’s economic output had been increasing steadily between 2017 and 2019, with gross regional domestic product recorded at P900.4 billion in 2019 driven mainly by the wholesale and retail trade, according to the Philippine Statistics Authority. Regional output in the two previous years amounted to P785.1 billion and P841.4 billion, respectively.

Ms. Monteverde said the adoption of digital technology is particularly important for the survival of micro, small and medium enterprises (MSMEs).

“The chamber aims to provide an environment conducive to capacity building, innovation and digitalization that will help the MSMEs adopt and thrive in the new normal,” she said, noting that the chamber will be building upon the groundwork laid out last year.

The chamber hosted various trade-related and knowledge-sharing activities online last year, including the annual Mindanao Business Conference, which was held virtually for the first time.

The group also assisted the Indonesian Consulate in Davao in launching an online program intended to strengthen and sustain ties among businesses within EAGA, composed of Brunei, Indonesia, Malaysia, and the Philippines.

“The chamber is looking forward to the resumption of trade cooperation. The chamber hopes to reactivate the momentum of sub-regional trade in the BIMP-EAGA through increased linkages between the business sectors within the sub-region,” Ms. Monteverde said.

She added that the chamber will strengthen relations with foreign chambers from the European Union, Japan, and China.

Chinese Consul General Li Lin, in a separate interview, said China’s diplomatic representation in Davao will soon include an official focused on economic ties who will develop more business and trade opportunities with Davao and Mindanao.

One of China’s main programs is encouraging Chinese companies such as Huawei Technologies and the Alibaba Group to work more closely with local government units.

“Alibaba in e-commerce, Huawei in 5G and big data. Both companies are important for smart city design-and-build providers,” he said.

He added that these companies can deliver tailor-made solutions for the modernization of agriculture, one of Mindanao’s main growth drivers.

Ms. Monteverde, a doctor, also said that while the government and the private sector are preparing for the vaccination program, businesses should carry on with their recovery plans while waiting for the actual rollout.

“We go full throttle, full speed to achieve our vision of this 2021… with or without the vaccination,” she said. — Marifi S. Jara and Maya M. Padillo

Decarbonizing for a better working world

(First of two parts)

Climate change is an urgent issue and taking action is critically necessary to limit and reduce global carbon emissions. Businesses in particular will need to consider their own carbon footprint. With collective technological capabilities, financial resources, innovative capacity and global reach to search for solutions towards a low-carbon future, many businesses worldwide are setting carbon reduction targets, progressing towards net zero. In fact, just last week EY Global Ltd. (of which SGV is a member firm) announced its plans to achieve negative carbon emissions in 2021 and net zero by 2025.

Combatting climate change is a unique challenge for each organization, but it is clear that a collective effort is crucial to avert disaster. With the ongoing pandemic reinforcing the drive towards a sustainable future, transitioning to decarbonization is more vital than ever to achieve long-term resilience for organizations as well as to aid economic recovery.

THE COSTS AND IMPACT OF CLIMATE CHANGE
The Economist estimates that by 2050, the global economy will be 3% smaller due to a lack of climate resilience, potentially raising the cumulative cost of damages to $8 trillion. Research from the EY Megatrends 2020 report also reveals that many Asian countries face high vulnerability to rapidly rising sea levels, flooding, and heat waves. Without clear action to decarbonize economies, hundreds of millions of people may be victims of coastal flooding by 2050.

Domestically, the increasingly worse effects of climate change directly impact the vulnerable agriculture and fishing industries in the Philippines. The Philippine Statistics Authority (PSA) said in a report that the production costs for crops and fish have increased between 2017 and 2019 compared to the period between 2016 and 2018. This alarming trend resulted in much lower income for farmers and fishermen.

MOUNTING PRESSURES FOR CARBON REDUCTION
Businesses are more cognizant of the significance of both decarbonization strategies and climate-related investments in achieving long-term sustainable growth. A rise in new industries to support clean technologies can be expected, while emission caps and carbon pricing could transform taxation and invert cost structures.

Certain governments in the Asia-Pacific have recognized the need to mitigate the disruptive risks of climate change. For example, Japan committed to achieve carbon neutrality by 2050, and China, the largest carbon emitter in the world, announced its intent to establish peak emissions by 2030 and reach net zero emissions by 2060.

The findings from the 2020 EY Climate Change and Sustainability Services (CCaSS) Institutional Investor survey indicate that investors need to look into long-term value by critically assessing company performance through environmental, social and governance (ESG) factors, including climate change.

In order to meet investor expectations and appear future-proof, companies need to prioritize means of analyzing the opportunities and risks of climate change. They will also need to prioritize how to improve disclosure of their sustainability performance, or else risk the possibility of losing access to capital markets.

The decarbonization of businesses is further accelerated by consumers, particularly Generation Z, who are also increasingly aware of how their choices impact climate change. Gen Z is becoming even more influential as stakeholder capitalism continues to rise. They believe in the essential role business plays in addressing climate change and prioritize businesses that protect the environment and utilize sustainable supply chains.

SEC REQUIREMENT FOR SUSTAINABILITY REPORTING
In a 2019 article, Sustainability reports: fad or for good? SGV Partner Benjamin N. Villacorte had articulated that companies are encouraged not to wait for sustainability reporting standards or a regulatory requirement to be mandatory.

Recall that in 2019, the Securities and Exchange Commission (SEC) required publicly listed companies (PLCs) to submit their Sustainability Report with their 2019 Annual Report in 2020. The issued memorandum detailed that the guidelines will be adopted on a “comply or explain” approach for the first three years upon implementation. By 2023, PLCs are required to comply with Sustainability Reporting Guidelines specified in the memo, or else be penalized for an Incomplete Annual Report (under SEC Memorandum Circular No. 6, Series of 2005).

This pronouncement reiterates the need for structured sustainability reporting and for companies to manage their non-financial performance towards achieving the universal target of improved sustainability. For it to be effective and useful, companies should not only view sustainability as an exercise in compliance, but as their responsibility to earn their social license to operate.

BUILDING A DECARBONIZED FUTURE
Given the foreseeable impact of climate change alongside the mounting pressure from investors, employers, leaders, consumers and policymakers to address it, organizations are encouraged to embrace the decarbonization imperative. Adopting a decarbonization strategy will bring about the goodwill of investors, employees and consumers, and also build long-term, sustainable value.

In the second part of this article, we will discuss how EY, as part of its commitment to sustainability, will tackle the challenge of becoming carbon negative by 2021.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views reflected in this article are the views of the author and do not necessarily reflect the views of SGV, the global EY organization or its member firms.

 

Clairma T. Mangangey is the Climate Change and Sustainability Services Leader of SGV & Co.

Duterte urged to allow navy to join drills in South China Sea

PRESIDENT Rodrigo R. Duterte should let the Philippine Navy join war games in the South China Sea after China passed a law allowing its coast guard to fire at foreign vessels in the disputed waterway, political analysts said.

“The President should now allow the Philippine Navy to join drills in the South China Sea, especially that Beijing no longer honors diplomatic protests,” Marlon M. Villarin, a political science professor from the University of Santo Tomas (UST), said in a Zoom Meetings interview. “We have to raise the flag in the disputed waters.”

The Chinese law allows its coast guard to “take all necessary measures, including the use of weapons when national sovereignty, sovereign rights and jurisdiction are being illegally infringed upon by foreign organizations or individuals at sea.”

Mr. Duterte has barred the military from joining naval exercises in the South China Sea to keep a lid on tensions, but critics see it as allegiance to China.

Mr. Villarin said the Philippines and other claimants should sue China before an international tribunal once it enforces its law.

Renato C. de Castro, an international studies professor at the De La Salle University (DLSU), said the Chinese law had killed any plans to come up with a code of conduct in the South China Sea.

Manila should also use its military pact with the United States such as the visiting forces agreement as a way of flexing its military muscles, he said via Zoom. Mr. Duterte should order the Philippine Coast Guard to deploy ships in the area and “raise our flag.”

Presidential Spokesperson Harry L. Roque, Jr. earlier said the Philippines would try to remain friendly to Beijing while protecting the national interest.

Mr. Castro said the government should not sacrifice its territorial rights in exchange for coronavirus vaccines from Chinese drug makers.

“We should not allow them to leverage their vaccines to put us on a defense slip,” he said. “Why should we sacrifice our territories for vaccines with a 60% efficacy rate?”

The Philippines last week filed a diplomatic protest against China. Foreign Affairs Secretary Teodoro L. Locsin, Jr. deemed the passage of the measure a “verbal threat of war.”

“It’s time that we also deploy our coast guard,” Mr. de Castro said, noting that the Philippines had yet to deploy 12 patrol vessels from Japan.

The law passed by the National People’s Congress standing committee of China will allow its coast guard to use “all necessary means” against foreign vessels that threaten them, according to the South China Morning Post.

Mr. de Castro said the Philippines could also use its alliance with the US even if it leads to tensions at sea. The latest Chinese law gives the Philippines more reason to renegotiate the visiting forces agreement (VFA) with the US, he added.

Senator Aquilino L. Pimentel III said the Philippines could work with other claimants for a “coordinated Association of Southeast Asian Nations response,” including speaking with China to prevent “untoward incidents.”

“Form a Department of Foreign Affairs think tank to propose a rule in international law to prohibit the militarization of disputed waters and the use or threat of arms,” the lawmaker, who heads the Senate foreign relations committee, said in a Viber message at the weekend.

Mr. de Castro said China was likely to ignore this. “You don’t need another law because what China would do is continue violating international law.”

The United Nations Permanent Court of Arbitration in 2016 favored the Philippines in a lawsuit that rejected China’s claim to more than 80% of the South China Sea based on its nine-dash line drawn on a 1940s map.

China has rejected the ruling but continues to negotiate with the Philippines and other Southeast Asian nations to come up with a code of conduct. — Kyle Aristophere T. Atienza and Charmaine A. Tadalan

1...7,1127,1137,114...12,807Page 7,113 of 12,807
© 2024 BusinessWorld Publishing.
All rights reserved.
Read our privacy guidelines
Facebook Instagram Linkedin Twitter Youtube