GRI Equity - sustainable success

"There is a saying 'you can't fool an honest man', which is much quoted by people who make a profitable living by fooling honest men."
from Going Postal by Dr Pratchett.

As you know, our principal focus is venture capital and the survey just issued by The Economist is worth reading. Members can find our copy here, others may log on to www.economist.com for access. Matthew Bishop, Business Editor of The Economist who coordinated the effort is quoted as follows:

“Private equity is at an interesting point in its evolution. A few years ago it used to be relatively easy to make money if you could raise the capital...Nowadays there's plenty of money. The challenge is actually putting the money to work. There are a lot of people who've come into private equity that don't have any special skills...My suspicion is that they're not going to be that good.”

This reflects our anecdotal experience. The large volume of capital combined with modest experience is a recipe that can implode. That was very painful for many managers (GPs), and more so for investors (LPs) when it happened in 2001.

We believe the that a pressure valve is at the VC end of the spectrum which has not been experiencing the overhang to the same extent as the buyout end, and the best opportunities are in the emerging alternative businesses which exhibit "integral" business models. This model of emergent behaviour is well illustrated by John A Wheeler, renown physicist, as follows:

[The incumbent business model] can only be replaced by another ‘emergent’ phenomenon, which is adopted ‘virally’ because any Enterprise which does not utilise it will be at a disadvantage to an Enterprise which does. By way of example of ‘emergent’ phenomena, we have seen how a 19 year old US programmer has single-handedly destroyed the entire business model of the global music industry through inventing on-line sharing of music in a network which grew to 60 million users within 18 months. In the same way, the small but powerful community of traders in physical oil moved their negotiations from the telephone into Yahoo instant messaging “chat rooms” without their management even being aware of the fact. They did so because it was free, because they could, and because it worked.

Perspective

It is rather unsatisfactory that our global perspective must continually be dominated by a superpower in a world that is so interconnected. But it is a fact. Decisions should be made clear about the size and nature of influences on geopolitics; and the US does dominate. It is unlikely that Americans, like the rest of us, will continue to be overcome by fear and greed. Whether W or another is the chief executive, Americans are already pioneering new systems, like public polling, member owned companies and recyclable cars, which will catalyse flexible, multi-cultural society. The quote above on emergent phenomena is from an American. Nevertheless, in the short term the dominant US mindset does bear on strategy and investment.

And do not be distracted from the wealth of opportunities that lie elsewhere. The US offers much, but the dynamics of Asian and South American business and trade are becoming much more interesting even for large players. These emerging economies are well matched to do business. They can interface compatibly along industrial and economic dimensions, they are populous, command economic weight and they are eager to operate on a balanced playing field, not one dominated by erstwhile global leaders. Accessing these markets is culturally easier from a European perspective because of the historical ties and because Europe's culture is more inclusive. This dynamic is accelerating fast, as seen in trade and investment data, and offers investors attractive risk adjusted returns.

Geopolitics

The US election was a great success. While the differences between the candidates and parties may have been marginal, Americans should be proud of the electoral turnout on 2 November.60 percent of eligible citizens voted, the highest since 1968 the Committee for the Study of the American Electorate reported. The committee, a non-partisan group, said almost 120 million people voted, up from just over 105 million four years ago.

The 60% turnout is also greater than that usually represented in European or other elections. The high turnout was due to a massive mobilisation campaign built upon emotional platforms which still left many disenchanted by the options available. It appears that the election was won on feelings not economics. Swing voters associated more comfortably with the good ol' boy from ConnecticuTexas rather than the unknown senator. And the outcome reflects the culture of America. American culture is weighted around the authoritarian and strategic mindsets characterised by integral psychology and has little emphasis for external cohesion (in the colours of spiral dynamics it is blue/orange, and little green). There is a low likelihood of people opting for an unknown over “the devil you know”.

The warm feeling of a vibrant election has already given way to the realities of managing a superpower. Bush has already made conciliatory noises - bring the nation together, reduce the deficit, solve the crisis in the Middle East, even in Northern Ireland (where he has spoken with Gerry Adams and Ian Paisley about the peace process) and so on. But the administration's track record is poor - the current US administration has approached diplomacy with a more belligerent culture than collaborative, and its motives are not clear. If W is merely aiming to look good, then time and goodwill will be wasted. And the troubles are many: deficit, currency, trade policy, middle east, retiring baby boomers, healthcare and the desire to leave a good looking legacy. In our view only a collaborative, forgiving approach will satisfy so many competing needs. One of our favorite sayings is relevant to helping America adjust perspective: "When the glass is half full ... get a smaller glass", i.e. manage expectations differently.

The Ukraine is offering a different show of democracy in action. An obviously biased election process returned an incumbent favoured by neighbouring Russia, but having questionable legitimacy. Massive peaceful protests, including strike action, have stopped the country in many parts, including the capital Kiev. The result so far illustrates the tightening of central control by Putin in Russia and the extension of that style of diplomacy to the Ukraine. But a more European cultural leaning has made a powerful statement and may yet overturn the result.

The story unfolding in the Ukraine is remarkable. Like the events of 1989 around Tianenmen Square, peaceful action by so many people representing a large part of the population is asking for change from the traditional combatants, and a global viewing audience makes the peace possible. A feudal culture is being challenged by meritocracy/democracy. And it is not organised per se, it is self organising. The initial cry was from the sign-language translator on the evening news announcing the result who did not translate the rigged results but apologised for not reporting faithfully and warned viewers to beware of public propaganda. Goodwill is feeding the people in Independence Square. Congratulations Ukraine - let enlightenment shine.

The relative apathy outside Ukraine has been saddening – no concerted institutional efforts and little public actions. Perhaps if the Ukraine had the world's third largest reserves of oil it would be different. Nevertheless, it is well endowed with natural resources, a dynamic population and a sophisticated history which may attract enough international attention.

Interestingly both countries are linked by the US constitution one of whose drafters was Samuel Adams of Ukrainian descent, son of Samyilo Adamovich!

War and Terror

The big news in November was the final passing of Yasser Arafat, Palestinian leader. The massive show of sympathy and condolence seen around the world highlights the importance of resolving the conflict in the middle east. The emergence of a replacement administration is not complete but is expected to present a more flexible position which may result in progress to peace in Palestine/Israel.

Our coverage of Iraq has been modest because there seems to be little progress being made. The past month has seen terrible fighting in Fallujah which has consumed more time, people and weapons than expected. This failure to deliver on stated targets is a common trait of the occupying forces. The bombardment of Fallujah left behind a shattered city, having unleashed the full might of the US military against an estimated 6,000 insurgents, killing more than 1,200 fighters, of which 200 are estimated to be foreigners. 34 Americans and six Iraqi government soldiers were killed and more than 200 US soldiers were wounded.

An unfortunate accident on "our" own turf illustrated the questionable competence of occupation forces: an F-16 bombarded a school in Little Egg Harbour, New Jersey, instead of a target at a nearby firing range! Fortunately no one was hurt. [Please note that although we are "anti-war" we are "pro-solution" and recognise humanity's interconnectedness so we take (not often enough!) the integral perspective - "our".]

The imperialist policy and behaviour of the US reflects imperialism of the past but has its own dynamic.Tim Snyder of Yale Global (of the Bush alma mater) offers this reflective comparison between George Orwell's Oceania of the book 1984 and The Bush America of today:

Take the three slogans of Oceania's rulers: War is Peace, Freedom is Slavery, Ignorance is Strength. The current US president constantly defines the Americans as a peaceful people. Yet the only foreign policy innovation of his administration has been the doctrine of pre-emptive war. The president constantly speaks of freedom; it has become a kind of verbal tic. Yet his administration is the only one since the 1940s substantially to reduce the civil rights of Americans. The word "strong" appears incessantly in official pronouncements of all kinds. The president, it appears, maintains his own strength by purposefully ignoring the world around him. In so far as this makes him more likeable, it is indeed his political strength. How can such contradictory ideas be persuasive? Part of the answer has to do with the manipulation of the language itself, with what Orwell called Newspeak. In Oceania, Newspeak progressively replaced standard English, reducing the number of words in the language and promoting neologisms meant to curb thought. As everyone knows, America's official discourse, as typified by the president's active vocabulary, has declined precipitously. Indeed, the press and public often have trouble understanding what the president has to say, since it is expressed in a kind of ersatz English that, when read, often makes no sense. Tim Snyder, Yale.

"War is Peace, Freedom is Slavery, Ignorance is Strength"! Of course the emperor's new clothes are imaginary but we have been hurtling along for so long now that "group thinking" (as opposed to critical thinking) is taking time to change. It is important to accentuate the positive and focus on things that do make a difference, while remembering the risks we are exposed to, including the exclusionist mindset. The hotspots like Iraq, Palestine, Afghanistan must be resolved rather than allowed to fester. But let us not continue to line the pockets of those that got us in to the mess.

Investment, Finance & V. C.

As we enter December we may feel content that the market has performed, especially over the last couple of months. But I urge caution, again. December may be buoyant but this will be sentimental not fundamental. Morgan Stanley's Meecher may be talking of a tech boom again, but it appears more like a tech bubble with multiples like these (from James Montier of DKW and shared by John Mauldin – thank you):

And the timing of a correction is not far away (currently we're guessing a downward swing in the first quarter of 2005 but a more “recessive” move up to a year later, but more critical thoughts will be had before year end). The blip will be sentimental, whereas the more profound movement will be presaged by earnings that do not hit expectations - that is what to look for across the market.

The SRI industry is under attack, from within. Paul Hawken, of the Natural Capital Institute, condemned managers and other intermediaries for failing to "walk the talk". This opinion is well made, but controversial because the line between good intent and profiteering can be obscure. The article is here and responses are available online here. We have felt for some time that the demand for SRI management has consistently exceeded the human capacity of the investment industry. The technology, data and other resources are sufficient, but the emerging behaviour is so new that practitioners themselves, not knowing what to look for resort to traditional models. And investors choose SRI for varying degrees of "greenness" and engagement, not to mention other reasons, such as simple diversification or performance! Only investors themselves can screen for management authenticity. Investors can ask themselves some simple questions:

According to independent investment research firm, Innovest, a new review of the energy sector indicates that Norsk Hydro, BP, Suncor and Royal Dutch Shell are sector leaders and Yukos, PetroChina, Marathon, and Surgutneftegas are sector laggards. Shell remains one of the most socially responsible companies in its sector. Innovest’s assessment uses two proprietary analytical models: the EcoValue’21 and Intangible Value Assessment (IVA). Both take into account the level of risk and the company’s capability to manage that risk strategically and profitably in the future.

The report also suggests that there is a business case for responsible corporate behaviour, with the higher-rated companies outperforming lower-rated ones by 38.6 percentage points between 1996 and 2004. A similar report on the textiles sector from 2003 showed similar results. Companies with above-average Innovest IVA™ ratings, including the three leaders, Adidas, Nike and Liz Claiborne, outperformed companies with below-average ratings as a group by approximately 23% at the end of three years from April 2000 to June 2003. “An analysis of Innovest’s IVA ratings compared to stock price performance demonstrates that, not only consumers, but investors as well are becoming increasingly concerned with a textile company’s ability to proactively manage issues such as sweatshop labor and, to a lesser extent, the environmental impact of their products”, said Sue McGeachie, a senior analyst at Innovest and co-author of that report.

Micro lending has been increasing its visibility over the past year. A number of mainstream observers are looking at the developing markets as an untapped demand for their products and now begin to see micro-credit and its methodology as a way to access them. In November the International Fund for Agricultural Development issued a report on this rapidly emerging market. It can be downloaded from their site: www.ifad.org. Over the last five years the microfinance sector has grown at an average rate of 25 to 30 percent, IFAD says in a note. "Sixty-three of the world's top MFIs (microfinance institutions) had an average return of about 2.5 percent of total assets, comparing favourably with returns in the commercial banking sector."

While the insurance sector is facing scrutiny as Marsh Mclellan continues to negotiate for survival and pharmaceuticals giant Merck suffered the leaking of internal documents calling into question the company's integrity, another act in the saga of unravelling of corporate governance took place. Fannie Mae, which is under investigation by the SEC for accounting problems and earnings manipulation, said that if the agency found it had improperly accounted for derivatives, it would show an estimated net loss of $9 billion for the July-September period. Their auditor, KPMG, has refused to sign off on the mortgage giant’s third-quarter earnings report and caused the company to miss a regulatory deadline.

The Economist issued a report on private equity in its edition of 27 November. It will be interesting reading to all investors and may provide some insights for private equity managers too. (It revealed to me how Blackstone got its name from its founders - through translation and nuance of Schwarzman and Pete Peterson!) Members can find our copy here, others may log on to www.economist.com for access.

The first Global Private Equity Barometer released by Coller Capital surveyed institutional investors in North America, Europe and Asia. It found that 43% of respondents plan to increase their exposure to private equity next year, while another 48% expect to maintain current exposure levels. 9% plan to reduce current exposure. Dan Primack notes that " the balance is obviously tipped toward a continuing rise in the LP overhang phenomenon". A majority of LPs expect fund terms to either stay the same, or to change in their favour. Other interesting findings include: 25% of LPs plan to increase their investment staffs in 2005; European and Asian LPs are far closer to their target allocations than are North American LPs (75%, 80% and 35%, respectively); and that 65% of LPs expect increased distributions next year. Respondents also ranked the attractiveness of various sub-assets over the next 12 months. The order (from best to worst) went: European buyouts, Asian buyouts, North American buyouts, North American venture capital, Asian venture capital, European venture capital. This reflects the weight of fund raising initiatives but, in our view, does not represent the best opportunities.

Interest Rates and Currencies

The dollar has been trading around $1.30 to the Euro, and some economists have mooted its collapse, though this is unlikely. But downward pressure should not be underestimated. Bush has said he is committed to a strong US dollar, saying at the end of the 21-nation APEC conference that the best way to reassure those concerned about the dollar's decline is to deal with his country's large budget deficit. US Treasury Secretary John Snow agreed during a recent visit to Europe that the US deficit was too large, but confused the issue by saying at the same time that America would pay whatever it takes to win the war on terror. There is growing skepticism whether America's commitment to the strong dollar is genuine. It is clear that the federal government will continue to borrow. A week previously, the president signed a new law, allowing the government to increase its borrowing by a further $800 billion.

Currency and trade are obviously priorities for the second Bush administration - and for Europe and Asia, whose currencies have strengthened significantly against the US dollar. Many European businesses are becoming uncompetitive against American ones, with the euro stronger than ever. But Snow virtually ruled out any significant US intervention on the currency markets. Even Alan Greenspan recently suggested that the dollar might fall even further. Longer-term investors like pension funds and perhaps monetary authorities may be either hedging their dollar risk or moving assets out of the United States.

With Europe and Asia financing the US deficit and domestic policies that do not fill the treasury there is nothing to suggest its rebound. Domestic consumer demand is soft, and will only receive a seasonal boost from now till year end. Its $ 592 billion trade deficit is large by any standards - more than 5% of the total value of the US economy over the last year. And so is the budget deficit at $ 413 billion. The current account deficit also hit a record $ 166 billion in the second quarter of 2004. Morgan Stanley believes that despite the falling dollar that the US trade gap will widen dramatically in 2005, to as much as 7% of GDP. This is unprecedented, and could only happen because the dollar is a world reserve currency. It is not immediately apparent where this trade and investment will go and certain that the Euro is becoming a reserve currency. Greenspan said cutting the U.S. budget gap would be the best way to boost domestic saving and lessen America's reliance on foreigners to fund the huge shortfall in the current account.

There was improvement in job creation reported in the last month, but this was not enough to create positive sentiment. And the 337,000 jobs created were not enough to counteract the recent shortfalls. Economists will watch for further signs of improvement, but the fundamental demand for labour does not appear to be buoyant. The structural problems of an overpriced and inappropriately trained workforce are too big to ignore. Other critical issues that need enlightened policies but have received little include tax reform, education, healthcare and industrial subsidies.

The US deficit could become the cause of a US recession as borrowing to pay for current consumption becomes untenable. And because our global economy is US-centric, the knock-on to others could be vicious. This unattractive scenario is now becoming realistic because the size of the deficit is staggering, the need to adjust is increasingly present and the possibility of engineering a controlled correction small. Two scenarios are present therefore: a crash or a gradual depreciation of the dollar. Planning for a gradual depreciation over three years to half its current value would highlight appropriate corporate finance and operations strategy and go some way to dealing with a crash if preempted.

A little recognised pressure valve is the natural migration of economic weight from the US, particularly to Asia and South America, but also to Europe. Africa is rising but will have to wait some years before it reaches the scale and sophistication required to participate across the spectrum of the global economy. A weaker US currency would also help this sophistication of markets as US commodities would become more attractive and subsidies would be required less, promoting the liberalisation of trade.

Trade and FDI

China is expected to invest $ 100 billion in South America over the next 10 years. China's President Hu Jintao is making a two-week Latin America tour to expand China's economic presence in the region. China announced that it will invest nearly $ 20 billion in Argentina over the next 10 years. Brazil was granted greater access to China's market for chicken and beef products. The beef deal alone is expected to be worth $ 600 million a year for Brazil, ministers said. It also gained a commitment from China to order at least 10 airplanes from Brazilian maker Embraer. To facilitate trade, the Chinese are offering between $ 5 billion and $ 7 billion worth of investment to improve Brazil's roads, railways and ports.

These intentions underlie a significant shift in economic power from a US/Europe axis to an Asia/South America one. Expect to see more. This dynamic is expected to offer attractive risk adjusted returns for those with a conscientious approach. The cowboy approach is still useable but investors should weigh the risks appropriately.

Energy

Oil prices are still hovering around $50 a barrel as demand for winter heating rises. US government data showed heating stocks ahead of winter remained 16% down on 2003 levels. Prices have risen more than 70% this year, driven by supply problems in the Middle East and continuing demand from US, Europe and increasingly China as its consumption now impacts global supply.

Climate Change

Another report confirming the advance of climate change was released in November. The Arctic Climate Impact Assessment (ACIA) reports on "Impacts of a Warming Arctic" where some of the most rapid and sever climate change occurs and, in recent decades, where temperatures have increased almost twice as fast as in the rest of the world.

The world can ward off a dangerous rise in temperature much more cheaply than many people think according to Professor John Schellnhuber, of the University of East Anglia, believes the cost of averting runaway climate change could be as low as 0.3% of global GDP. He is proposing that the world can avoid a major catastrophe, admitting that there is no simple solution for reducing greenhouse gases, and the world will need a mix of strategies.

Thirty-five of Japan’s leading industrial operators have signed up to a $135 million pooled fund to buy carbon emission rights from foreign companies. Among the companies involved are Toyota, Sony, Mitsubishi, Tokyo Electric and the Japan Iron and Steel Federation. It is expected the fund will operate until 2014 and will buy emission rights amounting to up to 20 million tons of greenhouse gases. The fund has been established just three months after the Japanese government hinted that a voluntary carbon-trading scheme would be its preferred option in its approach to Kyoto. The government plan is to subsidise organisations that choose to participate, but to withdraw that subsidy if the signatory fails to meet its reduction targets.

Kyoto

The Kyoto Protocol is to enter into force on 16 February 2005, becoming legally binding on its 128 party countries. The 90-day countdown to the protocol’s entry into force was triggered today by the receipt of the Russian Federation’s instrument of ratification by the United Nations Secretary-General. The protocol sets a commitment period of 2008 to 2012. The 30 industrialised countries that signed up to reduce their emissions must prove they have done so as an average over the five years. The target for those 30 countries is a cut in greenhouse gas emissions of 5.2 per cent on average, which will become to be seen as insignificant well before the period expires.

Australia, Liechtenstein, Monaco and the United States have not yet ratified the Kyoto Protocol. Australia and the United States have stated that they do not plan to do so; together they account for over one third of the greenhouse gases emitted by the industrialized world.

The most immediate effect of the protocol’s entry into force is to legally underpin international emissions trading markets ahead of the commitment period. It also adds political weight to the EU’s emissions trading scheme. From wind farms in New Zealand to landfill projects in South Africa, emissions reductions will have financial value. Point Carbon estimates that the global market will be worth Euro 10 billion in 2007. The formalisation of this polluter pays legislation will galvanise investment and opportunities in alternative energy and materials.

The EU scheme is already operating. More than a million tons of CO2 changed hands in September, nearly double the figure for all of 2003.Already over six million tonnes of CO2 have been traded so far in 2004. It remains tiny, though, when compared with 2.2 billion tons annually that can be potentially traded within the EU from January next year when Europe's carbon market will officially be launched. Turnover in the European market could range next year from 125-250 million tons, rising to 400-800 million tons from 2008. This estimates that the total value of the EU emissions trading scheme will reach Euro 8 billion in 2007, before the Kyoto commitment period even starts. The current market price is about Euro 8.75.

The 25-nation EU uses a "cap-and-trade" approach. Governments set individual emissions targets for 12,000 plants that are big CO2 emitters, such as coal, and oil-fired power plants, chemical works, pulp plants and cement and glass factories. For every ton of CO2 that goes over their target, these plants are liable to a fine of 40 euros (48 dollars) during a three-year transitional period. From 2008 to 2012, the punishment zooms up, to 100 euros (120 dollars) per ton of CO2.

Moving first can be risky, but it can also mean gaining trading expertise and the financial clout that makes your region or capital the natural hub of business. The preamble to the launch has been beset by squabbling and lack of experience as players try to get pole position. This will enable them to maintain credibility in the coming years as regulators question audits which will be the basis for fines and payments.

Leading that campaign is the UK, which has been running a pilot scheme of its own to gain skills in how the market will run. The scheme will be subsumed into the EU within a couple of years. London's International Petroleum Exchange is gearing up to allow carbon futures to be traded by the end of the year, in the same way that oil and gas futures are traded now, and spot trading will come next year.

Transport

Over the past two years, the IEA has worked with the WBCSD’s Sustainable Mobility Project (SMP) to develop a global transport spreadsheet model (xls 8.3 MB) that can serve both organizations in conducting projections and policy analysis. The accompanying report, EA/SMP Transport Model (incl. Documentation & Reference Case Projection), documents the model (pdf 40 kb) and describes the final reference case used in the SMP’s Final Report, Mobility 2030: Meeting the Challenges to Sustainability. The IEA/SMP Transport Spreadsheet Model is designed to handle all transport modes and most vehicle types. It produces projections of vehicle stocks, travel, energy use and other indicators through 2050 for a reference case and for various policy cases and scenarios. It is designed to have some technology-oriented detail and to allow fairly detailed bottom-up modeling.

The model does not include any representation of economic relationships (e.g., elasticities) nor does it track costs. Rather, it is an “accounting” model, anchored by the “ASIF” identity: Activity (passenger and freight travel), Structure (travel shares by mode and vehicle type), Intensity (fuel efficiency), Fuel type = fuel use by fuel type (and CO2 emissions per unit fuel use). Various indicators are tracked and characterized by coefficients per unit travel, per vehicle or per unit fuel use as appropriate.

Open source software is opening opportunities for many as its acceptance increases. According to Spread Firefox, within a scant two weeks, Firefox downloads have swelled 60% to 8 million. Firefox is the open source browser component of Mozilla. The uptake of OpenOffice.org is also growing. They are all written for Windows, Mac and Linux.

Linux software could "generate significant savings", according to the UK's Office of Government Commerce (OGC). The UK government departments moved a step closer to using open-source operating systems such as Linux after a study found that they were "viable" products. For other governments and firms, especially in the developing world, the attraction of open source software is more flexibility and reduced costs. Governments in Germany and France have installed Linux systems in recent months and China, Japan and South Korea have agreed to work together and develop an Asian version of Linux.

John Oughton, chief executive of the OGC, said that the pilot schemes in the UK show that Linux "could support government bodies by offering efficient and cost-effective IT solutions. ... This report will assist public sector bodies in making informed, value-for-money judgments when deciding upon which solutions best suits their needs." They found that using Linux can extend the life of equipment and limit the number of servers need to run programs. It also said that there were potential "green" benefits.

Microsoft has been cutting the cost of its products to retain customers even offering free shaved down versions of its products. They have also gone as far as to threaten Asian governments saying that they could face intellectual property rights claims if they use free software such as Linux, though the Linux community disputes these infringement claims.

Integral Systems and LOHAS

WWF, the global conservation organisation, warned again that human's are consuming the earth. Human consumption of natural resources is currently outpacing the earth's capacity to regenerate by 20%, ultimately putting humanity itself under threat from ecological disasters such as climate change. The report is based on the 'ecological footprint' index, which measures consumption of natural resources. On average, the report says that each person on earth consumes 2.2 hectares of land when there are only 1.8 available. Energy consumption is the fastest-growing component of the ecological footprint index, increasing by nearly 700% between 1961 and 2001, according to the report. Waste, food, fibre and space needs for infrastructure are other components of the index.

The scale of the extinction threat facing animals and plants is made clear in the latest Red List from the IUCN-The World Conservation Union. The leading environmental information network says 15,589 species are now known to be in a perilous position, listed as either Critically Endangered, Endangered or Vulnerable. Humans have been the main cause of extinction and continue to be the principle threat to species at risk of extinction. Habitat loss, introduced species, and over-exploitation are the main threats, with human-induced climate change becoming an increasingly significant problem.

Although estimates vary greatly, current extinction rates are at least one hundred to a thousand times higher than background, or "natural" rates" . Science has understood for some years that an eighth of all birds and a quarter of all mammals are in jeopardy. But the latest Red List shows a third of amphibians and almost 50% of turtles and tortoises are on the brink, too. The IUCN, which can call on the expertise of some 10,000 scientists across the globe, believes the threat facing global biodiversity is escalating.

A separate index tracks populations of more than a thousand animal species. According to this 'living planet index', populations fell by 40% between 1970 and 2000 - an average of 1 species disappearing every 13 minutes.

Recently announced is a commercially available plastic made from non-mineral oil sources, like maize oil. Cargill and Dow Chemical's joint venture, Cargill Dow LLC, has two main prod NatureWorks™ PLA is a family of packaging polymers (carbon-based molecules) made from non-petroleum based resources, and Ingeo is a family of polymers for fibers made in a similar manner.

While America resists popular liberty (with the Patriot Act and other misnamed innovation) the tide of enlightenment moves on elsewhere. In Ireland, traditionally staunchly conservative and Catholic, both the archbishop of Dublin and the Taosaich (Prime Minister) have approved rights for non-traditional caring relationships. Archbishop Dr Diarmuid Martin appeared to give his approval to legal rights for couples, including homosexuals, who live in relationships other than marriage, saying "I recognise that there are many different kinds of caring relationships and these often create dependencies for those involved. The State may feel in justice that the rights of people in these relationships need to be protected."

In the UK the state health provider, NHS, has approved t'ai chi classes to promote their physical and mental wellbeing - another sign of enlightenment.The inclusion of t’ai chi is due to the growing recognition in Britain of its usefulness in combating heart problems and improving digestive and respiratory health. The scheme was announced last month as health minister, Stephen Ladyman, published a progress report on services for older people aimed at helping them increase longevity, promote health and reduce age discrimination.

Not necessarily LOHAS but an important piece in understanding history, the 'original' great ape was discovered. Scientists unearthed remains of a primate that could have been ancestral not only to humans but to all great apes, including chimps and gorillas. Details of the sensational discovery appear in Science magazine. The new specimen was probably male, a fruit-eater and was slightly smaller than a chimpanzee, researchers say. It is one of the most complete ape skeletons known from the Miocene Epoch (about 22 to 5.5 million years ago). But not all were convinced by the conclusions drawn by the Spanish researchers. More fuel for the fire.

Consumer groups and the beef industry in the US faced public panic over the nation's food supply after officials at the Department of Agriculture revealed they had found a possible case of mad cow disease. The government admitted preliminary screening for the neurological ailment, which can be transmitted in a different and usually fatal form to humans, had proved positive on the animal. But they insisted further conclusive tests were needed. The news sent beef prices tumbling.

Fast food giant McDonald's is losing its second boss in seven months due to health issues. Chief executive Charlie Bell stepped down to focus on fighting cancer. He had been diagnosed with the disease shortly after taking over from Jim Cantalupo, who died suddenly of a heart attack in April. Jim Skinner, a veteran of 33 years at the company, will assume the top job. McDonald's has ridden out a rough patch in recent years, switching to healthier options and seeing profits surge. Among the firm's innovations are a greater range of salads and fruit, and in some cases smaller portions. The three months to September had seen a 42% rise in earnings.

Venture capital received another indication that its work style is not healthy. We heard that Brent Wheeler a longtime director with European private equity firm Cinven passed away last week at the age of 53. It reminded us of our disbelief on hearing of Tony Lorenz's death in 1990 at the age of 46. A more balanced approach is appropriate - I'm sure the families of these people would gladly give up the "gold" to have a few more years with them. Condolences to all family and friends of these early deceased.

Smoking killed almost five million people around the world in 2000, researchers from Harvard University and the University of Queensland have announced. The research, in the journal Tobacco Control, found premature death rates were evenly split between the developed and developing world, but men were over three times as likely as women to die an early death as a direct result of smoking. Three out of four smoking deaths in developed countries and more than eight out of 10 in developing countries were in men. The diseases that cause smoking deaths include cardiovascular disease, lung cancer and chronic obstructive airways disease. The leading cause of smoking related death was cardiovascular disease, which killed over 1 million people in the developed world and 670,000 in the developing one.

This is a wake up call for parents. Children's nursery rhymes contain 10 times more violence than British television shows broadcast before the country's 9pm "watershed" after which more adult content can be shown, new research shows. "You would hear about 10 times more violence if you listened to an hour of nursery rhymes than if you watched television for an hour before 9 o'clock on an average day," said Dr Adam Fox of St Mary's Hospital in London. He and his colleagues compared violence in 25 popular nursery rhymes like 'Jack and Jill' and 'Simple Simon' and in television programmes on Britain's five main television channels over two weeks. They found that in an average hour of TV there was five disturbing scenes compared to 52 in an hour spent listening to nursery rhymes. Nevertheless, the culture of TV appears careless to us and the greater intellectual stimulus from reading/listening make stories, even nursery rhymes a sensible option for us as parents.

Activities, Books and Gatherings

We are fortunate to have Ursula Morrish and Anthony Murphy joining our friends and advisors. Ursula brings a welcome diversity to our group and her artful perspective has already contributed to product development. Anthony is a professional educator, another poorly represented dimension, and an expertise dear to our hearts.

November has been busy preparing for year end and planning for next year. Reviews and budgets are in preparation. A number of articles are in the pipeline. All this preparation is appropriate for a northern climate which is now in the last throes of autumn. At Ballin Temple we have enjoyed a most colourful change of seasons, a tasty harvest and some spectacular moonscapes, some of which are online, and the return of the robin to the garden.

The dark evenings have persuaded me to do some extra reading. Although I've been fortunate to receive several books relevant to integral thinking which are introduced below, I've been enjoying Pratchett's latest book so much that I also re-read the first 2 Discworld novels which I'm now reminded also take a look at economics.

"There is a saying 'you can't fool an honest man,' which is much quoted by people who make a profitable living by fooling honest men." -- from Going Postal by Dr Pratchett. This is an excellent tale which takes an otherworldly view of venture capitalists and technology!

30 Lies About Money by Peter Koenig is a stimulant for the novice. While investors and others who play with money and economics might find it does not offer solutions or new perspectives, it will be valuable to those of us for whom money is a subject to be avoided. Koenig presents the language and concepts of money in the style of afternoon tea – it is easy to read and digest. Lynne Twist's The Soul of Money would be complimentary. For our take money, read Astraea's Money Makes The World Go Round!

The Hannover Principles 10^th Anniversary edition is another easy read which clearly presents the principles of natural design. You will forgive my bias for Michael Braungart, one of the authors, and enjoy the practical presentation of eco-efficiency, natural design and the connections of spirit and matter in this short book.

Nurturing Civilization Builders by Barabara Ray Gilles with Richard Kirby is a long awaited publication, originally titled Awakening Greatness. Barabara is a pioneering educator who weaves her story and philosophy together in this colourful narrative. Highly recommended for parents and educators, and also useful to people managers and trainers. My personal thanks to Barbara for so generously sharing her world with me. And congratulations on her new work at the Institute of Social Innovation.

Not read but on my list is Confessions of an Economic Hit Man by John Perkins, who was for 10 years a player in a high-stakes game of global empire. Perkins’ job as chief economist for Chas. T. Main, a secretive consulting firm with close ties to the U.S. intelligence and corporate communities, was much like that of an Enron accountant. He cooked the books in a gigantic international con game. He produced and defended grossly inflated projections of economic growth that were then used to justify infrastructure projects financed with debts to foreign banks that could never be repaid.

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November Round-up