S&P Global — 23 September 2024
Daily Update: September 23, 2024
Creating an Economic Model of Climate Tipping Points
By Nathan Hunt
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In recognition of New York Climate Week, S&P Global Sustainable1 published a special edition of the S&P Global Sustainability Quarterly. This week, the Daily Update will review issues raised in the publication.
In practical terms, a tipping point can be defined as a moment when a range of possible outcomes is radically reduced. For example, a glacier in Greenland has been steadily melting due to higher global temperatures. Up to a point, it is still possible for the glacier to stabilize or even expand. However, once enough melt has occurred, the structure of the glacier will be destabilized and the only possible outcome is collapse along with further melting. This is a tipping point.
They are familiar to climate scientists, who study the possible catastrophic tipping points of ecosystem collapse in rainforests or permafrost melting in the Arctic. Once these tipping points are reached, the possible outcomes become limited and detrimental.
From an economic standpoint, it should be possible to create a mathematical model of tipping points and their impact on economic performance. S&P Global Ratings Global Chief Economist Paul Gruenwald discussed such a model in “Tipping Points Shrink The Sustainable Growth Playing Field” and has been studying the intersection of climate and the economy on various fronts in "Could Green Growth Be An Oxymoron?"
To create an economic model of tipping points, Gruenwald distinguishes between weak and strong sustainability. In weak sustainability, natural capital, such as the environment and ecosystems, and physical capital, such as equipment, infrastructure and buildings, can be substituted for each other. This means that the destruction of an ecosystem can be compensated for by building a successful factory that employs many people. In strong sustainability, natural capital has unique benefits. Its destruction cannot be compensated for by gains in physical capital.
Another way of thinking of a tipping point is a moment in which the destruction of natural capital limits any possible offsetting gains of physical capital. Up to a point, natural capital has a regenerative function. However, it can be pushed beyond its regenerative potential. This can happen through a one-time shock such as a volcanic eruption, or slowly over a century of fossil-fuel-based industrialization.
“The introduction of tipping points shrinks the macroenvironmental playing field,” Gruenwald wrote. “Capital cannot be accumulated without bound, and output cannot expand without bound, as in earlier versions of growth models. Those models were incomplete in the sense that they lacked any consideration of natural capital.”
Today is Monday, September 23, 2024, and here is today’s essential intelligence.
How Climate Change Is Exacerbating Drought Risks
Climate change is exacerbating water-related risks, and S&P Global Sustainable1 projections show that many parts of the world are on a pathway to longer periods of severe or extreme drought conditions. Saudi Arabia, Spain and Turkey are large economies most exposed to more frequent drought conditions under a medium-high climate change scenario with limited mitigation, with more than 45% of the 2050s decade projected to be in severe or extreme drought conditions. In some countries, such as Mexico, Australia and Italy — severe or extreme drought conditions are projected to double in the 2050s under this scenario.
—Read the article from S&P Global Sustainable1
The Decisive | Ep. 14 — India's Demographic Dividend
As the world's most populous country, India faces unique opportunities and challenges in maximizing its labor potential for economic growth. This episode covers key topics such as employment prospects post-elections, government initiatives for upskilling and the critical role of female labor participation. Tune in for insightful analysis on how India can harness its workforce to become a global manufacturing hub while navigating the complexities of a dynamic labor market.
—Listen and subscribe to the podcast from S&P Global Market Intelligence
US Mortgage Revenue Bond Program Medians: Solid Foundations Underpin Strong Credit Quality
Credit quality for single-family and multifamily MRB programs generally remained stable or slightly improved as prepayments slowed, loan quality stabilized and A/L parity remained largely unchanged.
HFA management teams continue to meet their mission by balancing the provision of affordable housing solutions through a measured debt issuance plan, which S&P Global Ratings believes will result in ongoing rating stability for MRB programs.
—Read the article from S&P Global Ratings
Thai, Japan Refiners Hope For Steady Pertamina Interest In Russian Oil, Pressured Regional Crude
Thai and Japanese refiners told S&P Global Commodity Insights they are hopeful Indonesia's Pertamina would regularly embrace Far East Russian crude and take fewer Southeast Asian barrels, putting pressure on various high premium Malaysian and Brunei light sweet grades and helping improve their feedstock procurement economics.
—Read the article from S&P Global Commodity Insights
Listen: Europe's Refining Crisis: Grangemouth’s Closure And Its Ripple Effects
The impending closure of Grangemouth, one of the last six refineries in the UK, raises urgent questions about the future of Europe's refining landscape as profitability declines. Our experts examine the challenges facing the European downstream sector, including evolving supply chains and the impact of energy transition trends.
—Listen and subscribe to the podcast from S&P Global Commodity Insights
Microsoft, BlackRock Drive AI Capex Surge Beyond Tech Sector
Microsoft Corp. is enlisting non-tech partners to accelerate financing for the burgeoning AI infrastructure boom. Microsoft has partnered with BlackRock Inc.'s Global Infrastructure Management LLC and Abu Dhabi's MGX to establish a $30 billion fund, the Global AI Infrastructure Investment Partnership, dedicated to AI infrastructure. This initiative seeks to attract investments from asset owners, corporate investors and others, with an anticipated total investment of $100 billion including debt issuance.
—Read the article from S&P Global Market Intelligence
London, England: 4th Annual Global Emerging Markets Conference (Oct. 3, 2024)
This in-person event will feature critical discussions on credit and market trends, with thematic panels that bring together senior analysts and external market participants.
—Register for the in-person event from S&P Global Ratings