Pristine Seas team member, Alan Friedlander, sampling in the remote reefs in the northernmost region of the Seaflower Biosphere Reserve

After a number of years writing about ocean conservation as an academic, Enric Sala decided he wanted to take a more active role in protecting our seas. Here he tells Trudy Ross about his Pristine Seas project, which combines exploration and research to conserve the world’s oceans

LUX: What inspired you to dedicate your career to researching and protecting marine ecosystems?
Enric Sala: As a little boy, I grew up dreaming to be an ocean explorer and swimming in the Mediterranean, which was pretty much devoid of life. But one day I dived in a marine reserve where fishing was banned, and there I saw all the abundance of life that was missing from the sea of my childhood. That day I understood that if we give nature space, it can heal itself – and decided to work on protecting the ocean.

LUX: You made the jump from working in academia to being a full-time conservationist 15 years ago, because you wanted to stop ‘writing the obituary of the ocean’ and instead start looking at solutions. What were the biggest challenges you faced when making this career change?
ES: The biggest challenges are several. First, there is a large lack of awareness that we are overexploiting the ocean to a dangerous point beyond which it may never recover. Second, entrenched interests with strong political connections, like oil companies and the industrial fishing lobby, oppose more ocean protection. But despite these challenges we’ve been able to show that marine protection benefits not only marine life, but also people and the economy.

Pristine Seas team assembling deep sea camera onboard the ROU 23 Maldonado, South Atlantic Ocean Uruguay

LUX: Can you tell us more about your Pristine seas project and share some of its primary goals?
ES: Pristine Seas works with local communities, Indigenous Peoples and governments to protect vital places in the ocean, for the benefit of humanity. To date we have helped to protect 26 areas across the ocean, from the poles to the tropics, covering a total area over twice the size of India. Our goal is to contribute to the global target of protecting 30% of the ocean by 2030.

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LUX: What criteria do you use to identify and select areas for the Pristine Seas project, and how do you assess their ecological importance and conservation potential?
ES: We always support local conservation efforts, which can be divided in two categories: areas that are still near pristine and need to be protected before it’s too late, and areas that are somehow degraded but, if highly protected, they would deliver big gains for marine life, food and climate. Our approach is science-based, using global databases on marine life, fishing and carbon, and our own data collected during our expeditions to these vital ocean places.

The Pristine Seas team was invited by the government of Niue and Tofia Niue to help the island community survey its underwater environment in an effort to ensure the long-term sustainable use of resources

LUX: Can you discuss any recent discoveries or achievements from your expeditions that have improved our understanding of the marine ecosystem?
ES: Coral reefs suffer from ocean heat waves, which kill enormous amounts of corals. But we found that coral reefs can bounce back from these warming events if they are fully protected and harbor large abundances of fishes. It is the fishes that keep the reefs clean and allow the corals to return. Without the big and abundant fishes, dead corals are smothered by seaweed forever.

LUX: How do you engage with local communities and stakeholders when establishing marine protected areas through the Pristine Seas project?
ES: We always support local efforts to create marine protected areas through our research, storytelling and economic analysis. We work with local scientists to assess the health of their marine environment, provide local communities with cost-benefit analysis of protection, and advise them on how to implement their desire to protect more of their waters.

Kiribati’s Southern Line Islands where Pristine Seas launched a three-week expedition in 2020
LUX: What role do you see technology playing in marine conservation, and are there any specific technological advancements that have greatly enhanced your research or conservation efforts?
ES: Technology is key to allow us to explore the deep sea and remote areas, including satellite monitoring of illegal fishing – these have been instrumental developments to enhance our work. But technology and data alone are not sufficient. We actually need people to care. This is why we use our films and storytelling first, to inspire people to fall in love with their ocean – and then we provide the scientific and economic data to support action.

Dr. Enric Sala, photographed at NG Headquarters in Washinton, DC

LUX: How can governments and policymakers be encouraged to prioritise the protection of marine environments, especially in areas beyond national jurisdictions?
ES: For governments and policymakers, the easiest encouragement comes from the fact that ocean protection is good business! If we protect an area from fishing and other damaging activities, marine life comes back spectacularly. Fish abundance increases on average by 500% within a decade. Fish grow larger and produce many more babies, which helps to replenish nearby areas and helps local fishers. And when the fish come back, divers come in, supporting jobs and bringing in more economic benefits. Therefore, highly protected areas are a triple win. That’s what happens in countries’ waters. Beyond national jurisdiction, it is not as easy because many countries have to agree to protect an area.

Read more: An interview with Blue Latitudes: can oil rigs help save the ocean?

LUX: Pristine Seas has helped to create 26 of the largest marine reserves on the planet. Can you tell us about three of these areas which you find most fascinating, and which you would encourage our readers to look into?
ES: This is like asking parents which of their children they love the most! There are many wonderful places we have explored and helped to protect. A few examples are the kelp forests off the southern tip of South America, the pristine coral reefs of the southern Line Islands, and the offshore islands of Cocos (Costa Rica), Malpelo (Colombia) and Darwin and Wolf (Ecuador).

In March 2012, Pristine Seas, in cooperation with the PEW Charitable Trusts, undertook a month-long expedition in the four Pitcairn Islands

LUX: In your opinion, what are the most significant threats facing our oceans today, and how can we effectively address these challenges on a global scale?
ES: Overfishing, global warming and pollution are the major threats to ocean life. Overfishing is the easiest to solve, through responsible management of fisheries and protected areas. Solving pollution will require society to develop a circular economy without waste. And global warming is the most difficult of all, but it all comes down to halving our carbon emissions every decade to 2050, and to protect and restore more of nature so it can absorb much of our excess carbon pollution in the atmosphere.

LUX: Looking ahead, what are your aspirations for the future of marine conservation, and what would you like to see accomplished in terms of global efforts in the next decade?
ES: All the nations in the world agreed in December 2022 to protect 30% of the global ocean by 2030. We have a target. Let’s make it happen.

All images by Manu San Félix, courtesy of National Geographic Pristine Seas

Find out more: www.nationalgeographic.org/pristine-seas

Summer Compass Jellyfish. Photo by Theo Vickers

The protection of biodiversity is becoming a key topic in the sustainability sector. Now we need to measure our economies’ effects on biodiversity fairly and effectively, says Markus Müller in an interview with Darius Sanai

Marküs Muller

LUX: How do we measure our effect on biodiversity, or compare worms with whales?
Markus Müller: We need to find metrics that account for local specifics but are globally comparable. There is a parallel with economic activity, because humans live, produce and consume locally, yet we have found global metrics to measure the economics of human interactions.

LUX: What is the most important measuring tool in the context of nature?
MM: One important metric is the Mean Species Abundance indicator, or MSA, which identifies the impacts of an economic activity on the mean species in a designated local area. It indicates the abundance of native species in a disturbed ecosystem relative to undisturbed ecosystems. Another measure is the Biodiversity Intactness Index, or BII. Both can help us obtain information around an ecosystem’s ability to deliver the ecosystem services we depend on, and understand the influence of economic activity on nature.

LUX: But won’t the MSA in a desert have a different metric to one in a rainforest?
MM: The ingredients are different, but it is about the amount of species. We have business activity in a location and from that we get data on its pressure and impact. That shows how the MSA is clustered according to the activity in terms of climate change, land use, nitrogen deposition, hunting, road disturbance and fragmentation.

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LUX: Is the metric accepted universally?
MM: It is getting more recognition by various institutions and participants. However, our goal should not be to have a universally accepted metric for its own sake; it should be on accounting for local specificities with a methodology that, in principle, can be applied globally. It is not 100 per cent perfect, but, given the need for urgent action, as made clear by the Intergovernmental Panel on Climate Change, the IPCC, I advocate not waiting till scientists have the perfect metric.

LUX: How will the metrics affect business?
MM: When we know the effect of a business activity on the MSA, we will then know the biodiversity cost of the activity, and we can bring that into the decision-making process around it.

LUX: Is the aim to have a tax or other regulation on businesses that affect the MSA?
MM: Yes. The disclosure of a company’s MSA would allow the market to better price its exposure to nature– and climate-related risks, and take these factors into account for a valuation.

LUX: Would it work like carbon credits?
MM: Biodiversity credits are not comparable to carbon credits in a key sense because, other than for the actual removal of greenhouse gas emissions, carbon credits are used to compensate for current carbon use. Biodiversity credits must be purely an incentive not to destroy biodiversity, not to offset its loss. We can use economic incentives, such as reduced taxation, or a market system in which participants exchange credits.

LUX: How will the nature market develop?
MM: It will likely develop as we’ve seen equity or fixed-income markets develop. I would add the caveat that we should never monetise nature, but understand its value and what it gives us, so we can protect the value that ecosystem services provide, while enabling their uninterrupted flow. We need to prioritise the intactness of nature.

Photo by David Clode

LUX: How will governments regulate this?
MM: It is a question of the governance of nature. If we do not know how to govern nature, we also do not know what kind of mechanism to use to manage and assess its governance. For example, effective governance also means you need to include local communities into the responsibility of governing these resources.

LUX: Is there the desire among governments and voters to make this happen?
MM: On the one hand I think, yes; on the other, it requires uncomfortable decisions. So we need to remind ourselves again about economics and diminishing marginal utility. Humans will act in a familiar pattern for as long as the marginal utility is positive. We only change when it is no longer possible to proceed as we were.

LUX: Will listed companies make decisions based around biodiversity incentives?
MM: Yes, regulation is going in this direction. We see it with 30 by 30 – the initiative to create protected areas across 30 per cent of Earth’s land and sea by 2030. More than 100 countries are signed up. This development must not be limited to a specific region like Europe, we need a joint framework; even better, a joint narrative.

LUX: Is there a risk that companies make decisions based on one factor – biodiversity at the expense of carbon emissions, say?
MM: Yes, this is a risk of sustainability. We see it as a goal but, like economics, it is not a goal but a tool. Ideally, my role will be redundant in 20 years, as sustainability will be incorporated into everything. I think, in time, MSA or BII will be comparable indicators to CO2 emissions.

Read more: Leaders on Leaders: the people saving our planet

LUX: What would you say to an investor who says, “I just invest to make money”?
MM: I would say this way of thinking belongs in the past. We have to acknowledge that a high negative impact on nature is a financial risk as well as an environmental one. Nature-based risks – and opportunities – will materialise and have an impact on a portfolio. Companies not taking these into account, through an adaptive strategy, will have to pay a higher price in the future.

LUX: In five years, will a private-equity fund take MSA into account in decision-making?
MM: Yes, I believe so. I think it will play an increasing role in impact investing, but it will also play a role in the consumer-goods space.

LUX: If you were in charge of the world, what would you ask people to do?
MM: Go back to our roots. Think local, act global. Take account of nature, because we are a part of it. It is naive to disregard the system we are dependent on. We can’t do that any more.

Markus Müller is Environmental, Social and Governance (ESG) Chief Investment Officer at Deutsche Bank’s Private Bank

Fisherman at rest, 2012, Rafiqun Nabi

Bangladeshi artist Rafiqun Nabi’s diverse artworks provide a thought-provoking glimpse into social issues and the lives of the working classes in Bangladesh. Here, LUX explores his background and works

Bangladeshi artist Rafiqun Nabi is known for his diverse range of works, from cartoons, paintings, prints, woodcuts, and engravings. Renowned for his ability to blend creativity with social commentary, Nabi’s art sheds light on real issues and the lives of the working classes in Bangladesh.

Born in 1943 in Chapai Nawabganj, Bangladesh, Nabi’s passion for art developed during his school days in Old Dhaka when he began to explore his talent for drawing. Under the guidance of Bengali and Bangladeshi artists, Zainul Abedin and Quamrul Hassan, Nabi’s love for his craft continued to grow and led him to pursue printmaking.

Fisherman at rest, 2012, Rafiqun Nabi

Nabi’s famous cartoon character, Tokai, holds a special place in the hearts of many in Bangladesh and beyond. Tokai, a street urchin with a potbelly and a shaved head, embodies the struggles of poverty and destitution in Bangladesh. Despite his hardships, Tokai exudes cheerful wit, serving as a satirical reflection of the nation’s socio-economic conditions. His character became an emblematic figure for the underprivileged in the country, resonating with people from all walks of life.

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Nabi’s versatility as an artist is evident in his varied works. He departs from the cartoon style in his painting “Fishermen at Rest” (2012), which portrays hunched figures, entangled in one another as they sleep, play cards, and blow on flutes. The proximity of the fishermen contrasts with the spaciousness of the pier and the distant sea, representing the camaraderie and shared suffering within the fraught fishing industry of Bangladesh. Nabi’s ability to capture the soul of individuals amidst difficult circumstances infuses his art with life and vibrancy, and can also be seen in other works such as “After the Catch” and “Recreation”.

Fisherman, 2016, Rafiqun Nabi

In his painting “Boddho Bhumi” or “Killing Field” (2004), Nabi explores the theme of the liberation of Bangladesh. The piece offers a different perspective, utilising abstraction to evoke the emotions surrounding this significant historical event. In other paintings, such as “Rooster” (2008) he meditates on beauty and nature, focusing on animals which he depicts with a dreamlike quality.

Read more: Rasheed Araeen: The Engineer Behind The Artist

At the core of Rafiqun Nabi’s artistry lies imagination and empathy. His contributions to the art world have been recognised with numerous awards, including the Promoters Prize at Inter Graphic-80 in Berlin (1980), the Bangladesh Shilpakala Academy Award (1989), and the Ekushey Padak (1993).

Find out more: dbfcollection.com/rafiqun-nabi

This article was published in association with the Durjoy Bangladesh Foundation

Fishes, 24 March 2019, Teahupoo, Tahiti, French Polynesia. © Ben Thouard

Markus Müller discusses how the ocean, biodiversity, the global economy and the world of finance are inextricably linked – and proposes what should be done now to make business fit for a nature-compliant future

Markus Müller

Economics is deeply bound to nature. Portfolio managers in finance often think they invented the idea of diversification. I hate to disappoint them, but it was created by nature first. Nature, like economics, invented diversification for risk protection and to provide the breeding ground for development. If everything stayed the same, there would be no development – this is true for nature and true for economics.

According to some estimates, half of global GDP is directly attributable to nature. Some industries, such as construction, agriculture and manufacturing, use nature’s output to create economic output, and are therefore heavily nature-dependent. The biodiversity of nature is also essential to economics, because the wide assortment of living things provides crucial ecosystem services to the economy. These services range from providing fresh air and clean water to producing food. Nature provides everything that humans consume.

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The ocean plays a big part in biodiversity, as two-thirds of our planet is covered with water and more than 95 per cent of that is ocean. If we allow our ocean ecosystems to be depleted, we create risks for nature, for humanity, for the economy and for social stability. Human life is heavily dependent on ocean ecosystems and, if we let them deteriorate, the services we need to live and thrive will not be there. We would lose the critical services the ocean provides, such as the natural governance of carbon sequestration and temperature regulation. It is all one connected chain.

There are a myriad of links between nature and economics. The ocean is a great example of this, and an example of how we undervalue nature in our economic thinking. For instance, do we really understand the financial impact of having 40 per cent of the global population living near the coast with the threat of rising sea levels? Have we really taken into account how vital water is for our livelihoods and do we have an economic model that accounts for this?

Although our understanding of ocean economics has developed, there is still a long way to go. However, we do know enough to start taking action. Some may ask, why is it important to finance the blue economy? The real question is, how do we use finance to transform our current non-sustainable and non-equitable blue economy into a sustainable and equitable one? First, we have to be clear about the goal: to have a sustainable and equitable blue economy and a nature-compliant economic model. Creating such a model is the equivalent of the economics behind building and operating a railway infrastructure. To build a functioning train network first requires a railway system, which is too expensive for private markets to install and is the kind of cost that only a government can afford – but the trains can be provided and financed by private companies.

We need to enable the ocean to deliver its ecosystem services. Many ocean assets need to be protected in Marine Protected Areas (MPAs) and they are unlikely to generate an investment return. This means assets in MPAs are not suitable for a market system; rather, it becomes a governmental and societal responsibility to protect them and ensure they are not being depleted or overused. Governance is key for this to be successful.

Finance can be a tool that then helps achieve the goal for a sustainable and equitable blue economy. Global financial markets can play a role by providing a premium to companies that operate in the blue economy. In time, these companies that account for the impact that the ocean has on their economic activity can become more profitable and have more stable profit generation than other businesses. Those businesses that do not account for the ocean may find they are at risk: a reputational risk, a physical risk, even a liability risk. Financial markets can also provide indirect support to sustainable companies that understand how their value chains are impacted by the ocean. This is also part of ocean finance.

In this new economic model, firms link self-interest to the health of the natural machine. CEOs understand their dependency on the ocean and are therefore aligned for protection. This happens through transparency, disclosure and data flow. Regulation provides a framework, which can be supplemented by the private sector if needed, as regulators can’t do everything. The risk to watch out for is using key performance indicators (KPIs) that are not globally or locally accepted in financial markets. Here again, regulation is an enabler.

Companies that are directly involved in the blue economy should employ local people and redistribute the accrued margin to the local communities, based on the understanding that nature needs time to recover. This would be both sustainable and equitable. Self-interests will drive this and it will happen at the local level, bottom up, before eventually forming global coalitions. An economy, or society, works from an agreement of self-understanding. Thus, if humankind can reach an agreement that fossil fuels are not the way forward, then society will find a way to abandon fossil fuels. However, if there is not such an agreement, then global treaties will not be signed.

Read more: 3Sun Gigafactory’s Eliano Russo On The Clean Energy Transition

Literacy in the systemic value of natural capital is incomplete, especially in financial markets. It follows a similar path to the understanding of climate change from the past 40 years. But it is growing. We must now act on propositions such as those outlined here to build the nature-compliant economy of our future.

Markus Müller is Environmental, Social and Governance (ESG) Chief Investment Officer at Deutsche Bank’s Private Bank

Find out more: deutschewealth.com/esg

This article was first published in the Deustche Bank Supplement in the Spring/Summer 2023 issue of LUX

Idris Khan, ‘I Thought We Had More Time’, print created to raise funds for Ukraine

Sir Lawrence Freedman is one of the world’s foremost scholars of strategy and war. Here he answers our questions on the geopolitics around the Russian invasion of Ukraine and potential outcomes

Sir Lawrence Freedman

LUX: Was the West culpable of negligence and/or triumphalism in its policies towards the former Soviet Union/Warsaw Pact territories after the fall of the Berlin Wall, during the 90s?
Sir Lawrence Freedman: Within Europe at least, the end of the Cold War was a victory for liberal capitalism. The members of the Warsaw Pact plus the three Baltic states joined Western institutions (NATO/EU) and followed liberal democratic/ rule of law policies. This was also the case with the former Yugoslavia. In a few cases there has been backsliding into more illiberal ways, notably with Hungary and Poland, but by and large this has worked well. These countries are more prosperous and secure than they would have been outside these institutions.

This is the other side of the coin to ‘the NATO was wrong to push for enlargement’ narrative. As someone who was engaged in these issues at the time, and was not a great fan of enlargement, it was hard to avoid the strength of feeling in former Warsaw Pact countries that they wanted to be protected against some future Russian resurgence. They now feel vindicated in this view. Without gathering all these countries together in a single alliance there was also a risk of antagonisms developing among these countries.

For the first decade after the Cold War this was not a big issue with Russia (NATO entered into a special partnership with Russia in 1997 to prevent tensions). In retrospect the biggest failure was to advise a short and unregulated transition to a capitalist system which led to gross inequalities, cronyism and corruption.

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LUX: Vladimir Putin started off wanting to create a mutually respectful and harmonious relationship with the West, but was rebuffed, and swung instead to Russian extreme nationalism. True or false?
Sir Lawrence Freedman: Putin was not rebuffed. There were serious efforts in the early 2000s to work with Putin and consult Russia during this period. It took until 2007 for Putin to start to break with the West, when he made a speech at the Munich Security Conference condemning Western policies. He had two lots of concerns. The first reflected his view that Western countries did not follow their own rules when it suited them. His examples were Kosovo in 1999 and Iraq in 2003. The second was his anxiety about the so-called colour revolutions – Rose in Georgia in 2003 and then Orange in Ukraine in 2004-5, that saw popular movements demonstrate against rigged elections and corrupt regimes. This developed into a fear of a comparable movement in Russia, combined with a conviction that they were being manufactured by Western intelligence agencies.

Putin’s approach to exercising influence within Russia but also his views about how others operated was shaped by his background in the KGB and then his later role in its successor, the FSB. He shared the strong view among the Russian elite that Russia was, and must be treated as, a great power. As he became more antagonistic towards the West after 2005, which was gradual and not sudden, the nationalism increased. But the biggest driver has been his determination to protect his own power, which has also led to the increased oppression of oppositional elements at home.

LUX:At this stage, post-invasion, can you draw any parallels with any other invasions in modern European history?
Sir Lawrence Freedman: Not really. It is not on the scale of Hitler’s Operation Barbarossa of 1941 and far more substantial than the Warsaw Pact occupation of Czechoslovakia in 1968, and also the operations against Ukraine in 2014.

Tomás Saraceno, ‘Zonal Harmonic 2N 55/11’, part of the ‘Artists for Ukraine’ Exhibition at Tanya Bonakdar Gallery

LUX: Neither Ukraine nor Russia will suffer an outright defeat, so this war will end with negotiation. How can negotiations succeed if the principal Russian actors know they will be prosecuted for war crimes once they sign any peace deal? And what can be done about this?
Sir Lawrence Freedman: It depends on what you mean by outright defeat. It has been apparent from the first days of the invasion that Russia could not achieve its basic objectives of conquering Ukraine and installing a puppet government. It is however possible that Ukraine will achieve its core objective of getting Russian forces to withdraw from its territory, either through force of arms or diplomacy. Militarily Russia has already suffered one major defeat by being forced to withdraw from Kyiv and has now lost 40 percent of the territory taken in February. Russia is now gearing up to take and hold all of the Donbas which is the battle now just starting.

The war crimes issue is important for the long term but not so relevant to the short term. The key issues in a negotiation between Russia and Ukraine will be security guarantees and, most important, who holds what territory. The big issue for the external actors, including the EU and NATO countries, will be what happens to economic sanctions if Putin stays in power.

It is entirely possible that if either Russia acquires a chunk of land that it believes is defensible or if Ukraine pushes Russian forces back that there will be at best a temporary cease-fire and no proper peace settlement. In which case sanctions will stay and war crimes investigations will continue.

LUX: How likely is leader change in Russia in the short term?
Sir Lawrence Freedman: It is certainly possible but Putin has a firm grip on the levers of power in Moscow and he has put his people in all the key positions. His fear of popular movements has led to the suppression of independent media and free speech, and opposition figures have either been killed or imprisoned or pushed into exile.

A self-evident Russian defeat in Ukraine, reinforced by the numbers of killed and wounded, combined with the economic pressures resulting from sanctions, is likely to produce strain on the structures of power. We have already seen the start of purges as Putin blames others for his setbacks. These may start to produce a reaction amongst members of the elite. It is hard to see how Putin’s position could not be affected. The war was his decision and it has already gone badly wrong. But this is an area in which it is hard to make firm predictions.

Sabine Hornig, ‘It requires’, part of the artists for Ukraine Exhibition at Tanya Bonakdar Gallery

There have been rumours of poor health, most recently thyroid cancer. A medical condition could either oblige him to stand down or provide an excuse should he be forced to do so.

One should not assume that a new regime would be more liberal or technocratic. A failure in Ukraine would produce a backlash from the extreme right as well as from remaining moderates.

LUX: There is no world without Russia, says Putin, and Putin believes he is Russia. Does that mean that he will do what Hitler would have dreamed of, and unleash nuclear apocalypse, rather than be removed? And would his orders be obeyed?
Sir Lawrence Freedman: I don’t think so. This is obviously everyone’s nightmare but he would need others to implement the decision and there is still sufficient rationality remaining in the system for this to be allowed to happen. Signs that he was contemplating such a measure might even be a reason for those opposed to him in the elite to mount a coup.

NATO has been very careful not to get directly involved in the fighting, which would provide Putin with most grounds for escalation, even while assisting Ukraine in other ways. Putin is already getting his vengeance on Ukraine for resisting his aggression by attacking its infrastructure, economy and civil society.

LUX: Given how deeply the links between oligarchs and the state run, how can sanctions be lifted, even if there is a negotiated settlement?
Sir Lawrence Freedman: For reasons given above I think it will be difficult to lift sanctions while Putin is in power unless it is absolutely essential to confirming a satisfactory settlement. Moreover the negative effects of conflict on the Russian economy are not only the result of sanctions. There is a now a European policy to reduce energy dependency on Russia and many companies have either abandoned Business interests in Russia or will not now consider new investments.

LUX: It’s 2025. What do relations between Russia, Ukraine and the West look like?
Sir Lawrence Freedman: Relations between West and Ukraine will be closer. Whatever happens now in the conflict, the bulk of Ukraine will not be under occupation. I suspect it will be too early for membership of EU and NATO. These require demanding transitions, and will require Ukraine to deal with corruption. There will need to be a massive reconstruction programme in Ukraine to repair damage and help the economy recover. As for Russia it all depends. I would like to think that Putin will be gone so that there can be a start of a new relationship but lots must now happen for that to be the case. Either way it will take a long time for Russia-Ukrainian relations to recover. It will be very hard for Ukrainians to forgive what has been done to their country.

LUX: How severe will be the economic shock of this war be, beyond Russia and Ukraine?
Sir Lawrence Freedman: The economic shock is going to be severe. The war already risks pushing the West into recession next year. Food and energy costs are going up around the world, with poor countries often the worst hit. It is worth recalling that the Arab Spring of 2011 was triggered by rising food prices. The longer the conflict lasts the worse the economic hit, especially if it continues for more than six months and into next winter.

Olafur Eliasson, ‘Flatland Light’, part of the ‘Artists for Ukraine’ Exhibition at Tanya Bonakdar Gallery

LUX: Will China, the US or Europe gain or lose more, geopolitically, from the war?
Sir Lawrence Freedman: When this started it was assumed by many that China would gain because it would draw the US back into Europe with less time for Indo-Pacific. In addition, China had forged a virtual alliance with Russia just before the war began. At the same time it has had decent relations with Ukraine. From the start of the war it has talked about the need for peace but has not done much about it – for example offer services as a mediator. It has abstained at UN votes. It has supported some Russian anti-American propaganda points and argued strongly against economic sanctions (which it dislikes for other reasons). It would find an evident Russian defeat an embarrassment as it would undermine a partnership in which it had invested politically (if not economically). Beijing is also aware of lessons being drawn about the threat China poses to Taiwan because of the Russian experience in Ukraine.

The US has largely handled the war effectively. It has pulled NATO together effectively and has worked hard to support Ukraine without taking risks of being drawn into the war itself. It has reminded the world – post-Trump – that the US can be an effective foreign policy actor. It has acquired a lot of intelligence about Russian military capabilities. Assuming that Russia is a diminished power after this war, then US strategic calculations become easier.

Read more: GreenBiz’s Heather Clancy On Corporate Climate Action

The EU has had a less happy time, mainly because the conflict has exposed the way in which a number of member states, but in particular Germany, allowed themselves to become dependent on Russia for energy supplies. Also Germany was risk averse when it came to supporting the Ukrainian militarily and with France offering itself as a mediator. Macron could justify his efforts to keep the conversation going with Putin just in case it was possible to help with peace talks and humanitarian relief but he has so far little to show for the effort.

The UK has had by and large a good war. It has pursued close relations with Ukraine since 2014 and played an important role in training Ukrainian forces, and was the first country to respond to the current crisis (after its intelligence agencies called out the risk of an imminent invasion with the US) with weapons supplies. It has continued to take a lead in either supplying weapons itself or encouraging other donors. Less positively it has struggled to take in Ukrainian refugees and has had the role of the City of London as a home for Russian money highlighted, leading to more restrictive measures.

Sir Lawrence Freedman is Emeritus Professor of War Studies at Kings College London

Photograph by Isabella Sheherazade Sanai

The pandemic has accelerated the rise of environmental, social and governance (ESG) investing. However, argues Markus Müller, we must improve global standards continually if ESG is to fulfil its promise of driving economic growth while having a positive impact on the planet

Markus Müller

The coronavirus pandemic has made us acutely aware of risks to our existence and how fragile the global economic system is. Many are making the SARS-CoV-2 pandemic part of the reason why ESG has risen rapidly to the top of the global agenda, moving from rhetoric and ambition to action. At the same time, the many facets of ESG are being discussed and examined across a multitude of investment institutions, to establish what it really means and whether it serves a purpose at all.

In my view, ESG prompts a simple question about why and how we do things, as individuals, as investors and as companies.

ESG originally developed from institutional investors screening out negative risks in investment targets. Today, ESG is much more than a combination of investment ratings and exclusions. With the goal of sustainability as our objective, ESG offers a way of understanding and quantifying the non-financial dimension of economic activity and of avoiding the dangers of a ‘submerged iceberg’.

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This means identifying where the risks lie and developing innovative mitigation strategies. Mid- to long-term risk for an investor comes in many forms. Physical risks (damage or threat to physical assets due to natural or climate change) are accompanied by transition risks (business or investment risks on the journey towards a greener economy) and liability risks (reputational issues, breach of standards). These risks can affect companies in a variety of ways. Production disruption, raw material and share price volatility and capital destruction are just a few examples. Importantly, it all involves understanding nature as an asset, as an input factor in our production function.

Innovation means finding ways to avoid those risks while embracing change and preparing for new future-oriented businesses which are ESG-positive. This has two prerequisites. First, we need more data disclosure to measure the impact of what we are doing. Secondly, we need goals and an evaluation method. These two issues are linked: data will give us an understanding of the impact of economic activity and how to steer economic development, which in turn should allow us to refine these goals.

Systematic decision-making is more than just a means to an end in order to achieve an overarching, positive goal within the Purpose Economy. We must also ensure that, when looking at equitability of impact, a distinction is not merely made between labour- and capital-intensive activities. Rather, impacts should be considered in three ways: the impact of individuals (including companies); the impact of politics (including governments and institutions); and the impact of nature (including natural resources).

Fortunately, we already have broad goals. The UN Sustainable Development Goals and the linked UN Principles for Responsible Investment, along with the Paris Agreements as well as the (failed) Aichi Biodiversity Targets, have set the initial direction. But there is still no consistent global approach about how to go beyond these broad goals and to put them in a detailed synthesis with financial markets. Standards can help. Reporting is widening its scope: the Taskforce on Nature-related Financial Disclosures (TNFD) was recently launched to go beyond ESG scores and climate change, to include the risk factor represented by biodiversity loss. The International Financial Standards Reporting Foundation (IFSR) has also proposed the inclusion of sustainability standards within its constitution as it aims for the establishment of an International Sustainability Standards Board.

Read more: Dimitri Zenghelis on Investing in the Green Transition

So, we are advancing on multiple fronts, but the scale of the task here is enormous: even within rating agencies, ESG ratings and scores vary due to differing methodologies. Global sustainability standards for company reporting would allow integrating data, insights and ESG themes into business strategy, product-development cycles and risk management. Harmonised standards would also allow us to improve scoring, enabling a more sophisticated discussion of what exactly scores mean and the importance of a company improving its ESG score rather than just accepting it or simply trying to ‘game’ it.

At Deutsche Bank’s International Private Bank we continue to develop our methodology to make sense of this evolving landscape on global standards. We use ratings, drawing on the research and analysis of a leading third party provider, but it is important to consider these in context. We realise that we have to give firms credit for improvement on ESG metrics, for example. We also apply exclusions against sectors that go against UN goals and principles and generate long-term risks (around greenhouse gases, for example). Exclusions can also be applied on more individual value-based grounds.

Methodologies such as this require continual improvement through monitoring their effect on sustainability. But the priority should be to ensure that the impact of ESG on a client’s investments should be transparent and that they will lead to improved corporate behaviour on ESG issues. If we wish to make transparent the impact of our ESG activities, and if we want our economies to be ESG-positive, we need to all follow the same methods.

ESG is here to stay as a categorical imperative. It will, at the very least, slow down environmental degradation and will make the world and our lives richer and more meaningful.

Markus Müller is Global Head of the Chief Investment Office at Deutsche Bank’s International Private Bank. Find out more: deutschewealth.com/esg

This article was originally published in the Autumn/Winter 2021 issue.

Auctioneer Oliver Barker directing Sotheby’s global e-auctions. Courtesy of Sotheby’s.

As part on an ongoing monthly column for LUX, artnet’s Vice President of Strategic Partnerships Sophie Neuendorf forecasts this year’s emerging trends and evolutions in the art world

Sophie Neuendorf

We’ve just emerged from arguably the most difficult and unpredictable year in recent history. The Covid-19 pandemic caused a synchronised and deep downturn of the global economy in the first six months of 2020. Social distancing measures and a lockdown of businesses in reaction to the health crisis resulted in falling consumer demand and economic output. Skyrocketing unemployment shook consumer confidence, and companies cut back on investments in light of declining demand, supply-chain interruptions and the uncertain future.

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Amid the uncertainties and restrictions caused by the pandemic, fine art auctions plummeted in the first half of 2020. Total sales value dropped across all major regions. According to the artnet Price Database, global auction sales for fine art fell by 59% to $2.9 billion in the first half of 2020 compared to a more robust performance of $7 billion in the first six months of 2019.

Infographic courtesy of artnet

However, despite a 29% decrease in both the number of lots offered and sold at auction year-over-year, the global sell-through rate remained steady at 65% in the first half of 2020. Major auction houses pivoted to online platforms, generating some incredible virtual transactions. In June, Sotheby’s sold Francis Bacon’s Triptych Inspired by the Oresteia of Aeschylus (1981) for $85 million. Roy Lichtenstein’s White Brushstroke I (1965) achieved $25 million.

Even though 2020 will most likely be remembered as one of the most unpredictable and difficult years in modern history, it also pushed boundaries and accelerated the art world into the digital age. With this backdrop in mind, I’m going to take the risk and make 7 art world predictions for the year 2021 – because, if anything, last year has set the stage for some ground-breaking changes to aspire to.

1. Digitalisation is here to stay.

Plato was right: necessity is indeed the mother of invention. During the COVID-19 crisis, one area that has seen tremendous growth is digitalisation, meaning everything from online customer service to remote working to supply-chain reinvention to the use of artificial intelligence (AI) and machine learning to improve the art business. As I discussed in my last column of 2020, the digitalisation of the art market is here to stay. With galleries, museums, and auction houses pivoting online and thinking outside the box in response to the pandemic, a positive trend of accessibility, efficiency, and transparency accelerated within the art world. This also goes hand in hand with a global trend of sustainability and conscious living.

Naturally, an online viewing of art can never quite replace the in-person experience, nor should it. The impact of seeing Da Vinci’s Mona Lisa online is, of course, not quite the same as admiring it in person. However, the transactional element of the art market will emerge as a strong contender to the traditional brick and mortar purchasing process, democratising the art market and opening it up to a new generation of art lovers.

2. Some art fairs will actually happen this year. But they will be a balanced, online/offline experience.

With social distancing still de rigueur this year, it will be difficult for fairs to accommodate their usual amount of art-loving and people-watching visitors. Add to that a gallery’s sky high participation costs, especially after a difficult year, and we’re looking at only very few fairs happening in 2021. My conservative prediction is that those of us able to travel can look forward to visiting ARCO Madrid (which has been postponed to July), Art Basel in Basel, Volta Basel, Frieze London, FIAC Paris, and Basel Miami, at best. The rest of us will have to enjoy the virtual editions of these fairs again this year.

Read more: COMO Group CEO Olivier Jolivet on travel trends for 2021

3. Galleries will evolve as serious contenders to art fairs and traditional auction houses.

Gallerists have always been of utmost importance as a bridge between the creative genius of an artist and the wider public of art lovers and collectors.

This year, galleries who have embraced the innovation which the Covid-19 pandemic necessitated will emerge stronger than ever. Either through online sales and viewing rooms or through collaborations with other galleries and institutions, these art dealers will rise as serious contenders to brick-and-mortar auction houses.

4. Some young artists will start bypassing galleries and begin selling directly out of their studio via social media or other websites.

It’s already a widespread practice among young artists in Asia and I foresee it crossing over to Europe and the US this year. With countless galleries, unfortunately, having been forced to close over the last year, many artists may have become increasingly accustomed to selling via social media and other websites. Especially young artists may be inclined to bypass the traditional route expected of them by the art world, and chose to build their careers independently.

Roy Lichtenstein’s White Brushstroke I (1965) was sold by Sotheby’s for $25 million. Image courtesy Sotheby’s

5. Socio-economic issues will be at the forefront of major gallery and museum shows this year.

Artists have, historically, documented moments of change and upheaval. After a year that has compelled us to come to terms with a global pandemic, has seen us fight for equality during the Me Too and BLM movements, as well as confront global warming, now’s the time to examine these pivotal moments within gallery and museum shows.

The arts are known to push boundaries and open up discussions around difficult and oftentimes painful subjects in a spirit of tolerance, curiosity, and learning. I believe that galleries and institutions will harness this unique moment to exhibit artists who are capturing the zeitgeist.

Francis Bacon’s Triptych Inspired by the Oresteia of Aeschylus (1981) was sold for $85 million at auction by Sotheby’s in June 2020. Image courtesy of Sotheby’s.

6. There will be more fine art works sold at auction this year than over the last few years.

Given the global economic and private difficulties we are currently facing, it wouldn’t be surprising if the IRS, a divorce attorney or the grim reaper force the sale of many a private collection. It’s a rather gruesome prediction, but historically the art market has been very active during a time when some micro or macro-economic situations are under stress.

Looking at Deloitte’s Art & Finance report or artnet’s Intelligence Report, fine art has gradually emerged into a serious asset class. When you compare fine art sales to the S&P, for example, more often than not it is art which is a safer alternative asset than stocks or even real estate. It is highly likely that many artworks will find speculative buyers this year, as economic changes and challenges will cause a shift in wealth.

Read more: Visual artist Clara Hastrup on her studio experiments

7. There will be a major shift in the market resulting in a new focus on quality rather than quantity.

Life was moving along as rapidly and frivolously as usual during the months before the Covid-19 pandemic forced us into seclusion. It struck me even then that the art world was moving into an unhealthy direction, where being seen at a champagne reception was more important than the quality of work on display. Where people-watching at Frieze or Basel was far more interesting than any oeuvre, and gossiping about people or prices trumped any serious deliberations of the works on view.

However, the past year has forced all of us to focus on what’s truly meaningful within our lives and on how fleeting it actually is. How do we really want to spend our time? Do we actually have to visit all of those art fairs and events? Perhaps we should seize the moment and focus on those artists and personal interactions that really enrich our lives.

This may seem like a rather wild prediction, but I’m certain that only those galleries, fairs, and institutions will survive that really concentrate on bringing added value to our lives. Perhaps we will move to a ‘new normal’ where multiple editions of the same fair or gallery are unnecessary, but are, instead, complimented by an incredible and easy to access online offering. Now is the time to excite with quality, depth, and innovation – because time is precious.

Infographic courtesy of artnet

8. Art will not only evolve as an asset class, but also as a financial product.

Over the past few years, art has slowly evolved as a serious contender to assets such as gold, stocks, or real estate – and it is arguably a much more stable asset. Given the high barriers to entry into the art market, specifically to the high-returns, blue chip market, I predict that there will be a derivative product developed soon, to be traded on the market similarly to other indices.

Price indices offer important insights for anyone looking to track the performance of a collection of artworks produced by a single artist or movement. At artnet, for example, we already provide an innovative price index methodology that relies on the unique strength of our flagship product, the Price Database. Our proprietary method creates indices that track the evolution of artwork prices over time, which can be tailored to focus on artworks belonging to a specific medium, movement, size, or any combination thereof, and in comparison to other indices, such as the S&P. It’s only a matter of time until the exchange traded derivative is developed. Stay tuned!

Follow Sophie Neuendorf on Instagram: @sophieneuendorf

How well do you know your socio-economic and demographic grouping acronyms?

Abercrombie & Kent founder and LUX contributor Geoffrey Kent discusses how a new generation of consumers are influencing brands

How well do you know your socio-economic and demographic grouping acronyms? From the best-known, like Yuppie and Wasp, to the more recent, Sinbad – there seems to be an acronym for everyone.

If you are a frequent reader of my columns here on LUX or if you’re familiar with our luxury travel company, Abercrombie & Kent, you might be forgiven for thinking that we concentrate on attracting Dinkies, Tinkies (two incomes, nanny and kids), Glams (those who are greying, leisured, affluent and middle-aged), or even Rappies (retired affluent professionals), but in fact, we, like all brands, are increasingly turning our attention to the Henrys.

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Nothing to do with the Hooray Henry, this term was coined by Fortune magazine and stands for ‘high earners, not rich yet’, Henrys are those on their way to affluence, but not quite there yet due to high living costs and other factors. While Henrys span both the millennial and GenY generation, it is millennial Henrys, which are of so much interest to entrepreneurs and their marketers for two simple reasons.

Firstly, their numbers: as revealed in an all-important announcement in 2015 from the U.S. Census bureau, millennials (born between 1980-2000) surpassed Baby Boomers (those born between 1946 and 1964) as the largest generation in the U.S. (where this type of research frequently seems to stem from and of interest to me because of A&K’s American offices (A&K is headquartered in both London and Downers Grove, Illinois). Plus there are many, many more of them in comparison to their parents’ generation.

Secondly, their spending power: from now until 2040, millennials will be entering their prime spending years. They will be the key consumer segment driving the world’s economies.

The millennial generation had its biggest birth year in 1990, so using them as an example, the top 20 per cent Henrys (high earners, not rich yet) born in 1990 earn over $50,000 per annum and the top 10 per are earning more than $75,000 a year approximately. They are well on their way to affluence, and are more educated, better informed and setting the trends that other millennials will emulate.

And with millennials driving economies, as brands try to win their business, millennials will change the businesses and their offerings, thus affecting us all. They are driving what is coming to be called the ‘experience economy’, moving from consumerism towards experientialism (read more about how they are redefining luxury travel here). If you have a subscription to a streaming service and no longer purchase DVDs or boxsets for example, it’s all down to millennials and this trend. If you have noticed more travel companies urging you to experience a destination like a local or learn something on holiday, you now know who the cause is. This isn’t exactly new ground for A&K – we’ve been encouraging travellers to make horizon-broadening connections since the early 1960s – plus ça change.

Read more: Kuwait’s ASCC launches visual arts programme in Venice

Millennials and the Henrys among them are focussed on value, not price point, and interested in feeling proud of their purchases and the things they do. They are design-led, crave authenticity and want for everything they do to be climate positive (or at a bare minimum, neutral). They are the type to choose a travel brand that is philanthropic and does good in the places in which its guests travel (such as A&K). They want a curated experience, that does no harm (i.e. is socially responsible) and that is Instagrammable. They share their experiences in the same way that their parents related theirs at dinner parties.

They are searching for a connection to their communities, other cultures and the world at large. Travel is a practical way to process and respond to an increasingly complex globe.

Thanks to childhoods, lifestyles and the psychology of millennials, they are the ‘Do It For Me’ customer – exactly the type that appreciates a well-travelled and knowledgeable travel expert who will arrange their luxury holidays for them. A match made in heaven? Who knows, but it certainly was a match made sometime between 1980 and 2000.

Discover Abercrombie & Kent’s luxury travel itineraries: abercrombiekent.co.uk

Louis Vuitton’s strategy to overcome consumer inertia is to develop products, such as this from their 2017 pre-fall collection, which stand out as one-offs

The nature of luxury is evolving fast. Producers and consumers should wise up to the emerging multi-level landscape and never forget the power of the right kind of celebrity, says our columnist Luca Solca

Luca Solca

True luxury is about projecting the impression, or even the illusion, of exclusivity. That is what luxury is about. If you can do that from an accessible price point and if you can do it at a very high standard, that is good enough to be true luxury. What it takes to maintain this perception of exclusivity is interesting, because nothing in the modern luxury industry is really exclusive. If it were exclusive, it wouldn’t be an industry. We are talking about businesses that have to grow fast, and growth is the exact opposite of exclusivity. And true luxury is very subjective. True luxury for Bill Gates is buying a set of Leonardo da Vinci drawings, true luxury for middle class consumers is buying a Hermès handbag – there are a million shades of difference between one definition and the other.

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This is what I have previously referred to as the megabrand bathtub: we have a big bathtub and the tub is producing new consumers coming into the megabrand market. New consumers, especially if they are rich, stay in the megabrand bathtub to the point that they realise that middle-class consumers buy the same brands that they do. Then they either trade up within those brands, or they trade up to more expensive brands that they perceive to be more exclusive.

This is also going to be compounded by what I call the category spend shift in which rich new consumers will go through various categories and at some point, they will have so many products in their wardrobes that they will start spending money on something else. Which leads to the discussion about experiences – going on exclusive holidays and sending their kids to universities in England or colleges in Switzerland, buying second homes and holiday houses and then buying planes to reach them.

Louis Vuitton Autumn/Winter 2017

I think as consumers get closer to what an established rich person does and is, then they tend to spend less on luxury goods products, not more. There is a fundamental misunderstanding that luxury is for the rich. Luxury goods products are for people who get richer. They go through a time when they splurge and they have to buy their products necessary to fill their wardrobes and then they go into replacement mode. I think that many Chinese consumers, many of whom were early adopters, have now moved into replacement mode already. The reason why we are all talking about the shift from gold to steel in watches, and lower entry price points, is because luxury goods today are predominantly relevant for middle-class consumers. The bulk of the new growth is coming from middle-class consumers who may have a lot of ambition and desire but only limited spending power. They buy cheaper and less exclusive products than their earlier peers. The consumption of luxury goods does always penetrate down a market from the top, though. You start with the richest consumers, then you work your way down to the middle class, which is where we are today in China.

Read next: President of LVMH watch brands Jean-Claude Biver on luxury’s new culture

At the top, there is a small number of people who need to have very special services and products specifically for them. And new consumers have upped their learning curve. They buy more frequently than established consumers and therefore their experience grows faster. New consumers also have more sources to learn about their purchases, via social media and the internet, than used to be the case. Far from being a market where consumers are just shifting to high-end brands, which was the case three to four years ago, in today’s market even if you are in the high end, you are doomed if you stay static. If you just sell iconic products, consumers who have been in the market for a while will have already bought them. They will only part with their money if you give them something that they don’t have. That’s why there has been a race to replace directors; and why Gucci has totally thrown away the past and moved on to new aesthetics, taking a huge risk, which is proving successful. And this is why Louis Vuitton, by the way, is successful – because it developed cleverly isolated ‘in your face’ products that have infiltrated the market with capsule collections.

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