50 Finance Monthly. Inve s tmen t MSCI All Country World Index (MSCI ACWI) which has more than 2,900 companies representing large- and mid-cap stocks across 23 developed and 27 emerging markets, provided about 12% annualised return between the lows in March 2009 to October 2021. This is on the back of incessant global policy support – remember Draghi’s infamous “Whatever it takes”? In 2021, similar philosophy propelled the MSCI ACWI index to a 30% return in October year-on-year, undoing all the damage to our financial portfolios from the coronavirus pandemic, and important to our discussion later, with Chinese equities contributing nothing on a year-on-year basis. Chinese equities had a significant drop from the middle of the year as its policy moved to face reality. What China did should prompt us to recognise that reality does come back. In September last year it faced rolling electricity blackout in some of its regions. Among the several reasons for the blackouts, two stand out. One is simply that it has a policy of cutting power production when emissions reach a quota. Another was insufficient wind bringing an electricity shortfall. A third that is worth noting is simply that the rest of the world demands to keep growing, forcing more energy demand on the world’s main goods manufacturer, and they ran out of coal as a result. In other words, China is showing what it means when a limited carbon budget meets a global economy unwilling to reconsider how it does its business. According to estimates by Donald Matthews et al. published in Nature in January 2021, we have a carbon capacity of 440 giga-tonnes left if we are to prevent warming from exceeding 1.5OC. Last year’s “Last year’s emissions recovered to the 2019 record-breaking level - about 58 giga tonnes and means we began 2022 with only 380 giga tonnes left. At the current rate of emitting about 60 giga-tonnes a year, it is sufficient for only six more years. This reality will catch up with our investments.”
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