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art, philanthropy, energy: in transition

· renewable energy sources are set to account for nearly 21 percent of the electricity the United States uses for the first time this year, up from about 18 percent last year and 10 percent in 2010

· renewable energy provides 18% of total U.S. power generation, up from 10% in 2010

· corporate PPA’s for renewal energy accelerated from 0.1 GW in 2010 to33.6 GW by year-end 2019, with a record breaking 13.6 GW in 2019 alone.

· the carbon intensity of the power sector continues to decline. From 2010 to 2019, power sector emissions fell nearly 25%

· total U.S. greenhouse gas (GHG) emissions have fallen 4.1% over thepast decade, and now sit at roughly 12% below 2005 levels

“2020 Sustainable Energy in America Factbook”, produced for the Business Council for Sustainable Energy by BloombergNEF

Art, philanthropy, energy. The relationships between them have history. As the way we generate energy evolves, the relationships between art, philanthropy, and energy will, in all likelihood, evolve as well.

Yves Tanguy (French, 1900-1955), “What” (oil on canvas, 1940), in the collection of the Museum of Fine Arts, Houston. The Joseph and Sylvia Slifka Collection. Object Number: 2004.146

“Houston,” observed Gary Tinterow, Director of the Museum of Fine Arts, Houston, in 2019, “is a cultural capital largely thanks to the discovery of oil.” (Houston Chronicle)

Yet, the energy economy is shifting in Texas. Renewable energy constitutes an ever increasing percentage of energy produced and used in Texas. 

Texas, a competitive rather than regulated energy market, is first in the United States in wind power capacity and near to having the second-most capacity for solar PV after California.

Solar energy has a significant (“marvelous”) cost advantage over gas-fired power plants: the marginal cost of solar is zero. Texas is on course to build a quarter of the record new industrial-scale solar capacity being installed across the United States in 2020.

As the energy economy evolves, how will the philanthropy that supports so many museums and cultural institutions evolve?

Let’s begin our quest for understanding by taking a look at relationships between art, philanthropy, and energy. We’ll start by looking to Texas.

The U.S. state of Texas consumes the most electricity in the United States. Demand for energy in Texas has grown over five percent over the past five years even as it has declined nationwide (EIA as reported in the FT).

Adding solar power through the incentives of a competitive electricity market, Texas is near to having the second-most capacity for solar PV after California. Texas, further, now ranks first in the United States in wind power capacity.

Texas is home to the Museum of Fine Arts, Houston (MFAH). The MFAH is one of the largest museums in the United States. As of late 2011 it had the third-largest museum endowment.

The permanent collection of the MFAH consists of nearly 70,000 works from throughout the world, from antiquity to the present day (MFAH) .

Gary Tinterow, Director of the MFAH, grew up in Houston. He worked at New York’s Metropolitan Museum of Art for 28 years, serving from 2008 until his departure for Houston as chairman of the department of 19th-century, modern and contemporary art. Mr. Tinterow’s appointment as Director of the MFAH was finalized by the museum’s board of trustees in late November 2011. He started his new position in early 2012.

Richard D. Kinder, co-founder (February 1997) and now Executive Chairman of Kinder Morgan, Inc., one of North America’s largest energy infrastructure companies, serves as Life Trustee of the museum and Chairman of the Board of Trustees. Mr. Kinder served as chairman of the museum’s search committee that identified Mr. Tinterow as a candidate for the directorship of the museum.

The business of Kinder Morgan is involved primarily with oil, gas, and petroleum products. Kinder Morgan “owns an interest in or operates 83,000 miles of pipelines and 147 terminals. The company’s pipelines transport primarily natural gas, refined petroleum products, CO2 and crude oil and its terminals store, transfer and handle such products as gasoline, ethanol, coal, petroleum coke and steel.” (Kinder Morgan)

Mr. Kinder commended Mr. Tinterow: “Gary’s passion for the job and his encyclopedic knowledge were what convinced us. He has so many good ideas, and there is so much potential to make this one of the outstanding museums of the world.” (NYTimes)

For his part, Mr. Tinterow explained, “As sorry as I will be to leave the Met after 28 years, I think I’ve landed the best job in the world. It’s a matchless combination: a committed board, a passionate audience, a fine collection and an institution with the third-largest endowment in the country.” (NYTimes)

Mr. Tinterow observed that the endowment of the Museum of Fine Arts, Houston stood at $1 billion in December 2011 after the J. Paul Getty Trust in Los Angeles, which oversees the J. Paul Getty Museum (endowment: $4.8 billion) and the Metropolitan Museum of Art, New York (endowment: $2.6 billion).

Asked in June 2019 after the relationship of the museum to energy companies and oil, Mr. Tinterow replied that he has “enormous respect for the energy industry.”

“Houston,” he continued, “is a cultural capital largely thanks to the discovery of oil.” (Houston Chronicle)

Indeed.

As of June 30, 2018, the Kinder Foundation had donated more than $50,000,000 to the Campaign for the Museum of Fine Arts, Houston (“The Museum of Fine Arts, Houston, Annual Report 2017 – 2018,”p. 17). This followed $50+ million reported by the museum as donated by the Foundation to the capital campaign as of the years ending June 30, 2017, June 30, 2016, and June 30, 2015.

The Nancy and Rich Kinder Building, dedicated to art after 1900 from the MFAH collections, is scheduled to open in November 2020. Consisting of two floors and more than 100,000 square feet of exhibition space,the building will increase overall MFAH exhibition space by nearly 75%. (MFAH)

While the MFAH has benefited, and continues to benefit, from the business of oil, the mix of Texas energy is changing.

First in the United States in wind power capacity and near to having the second-most capacity for solar PV after California, Texas will build a quarter of the record new industrial-scale solar capacity being installed across the US in 2020 (EIA, FT).

The cost of solar has plummeted, with the average industrial-scale PV project just $0.80 per installed watt last year compared to $3.53/Win 2010, according to the “2020 Sustainable Energy in America Factbook”, produced for the Business Council for Sustainable Energy by BloombergNEF, that looks at the U.S. energy transition over the decade 2010 – 2020.

Solar has a significant cost advantage over gas-fired power plants. The marginal cost of solar is zero. “The key thing is they have a magnificent cost advantage over gas-fired power plants,” observes Edward Hirs, energy fellow at the University of Houston. “The marginal cost of solar is zero.” (FT)

Investors in renewable energy, with time horizons of more than a decade, moreover, like the stable returns of projects backed by long-term contracts. (FT)

Corporations are taking advantage of falling costs to sign long-term solar power purchase agreements. Of the record 13,600MW of clean energy deals that companies completed in the US in 2019, 5,500MW of deals were generated in Texas. The majority of the deals closed were based on solar energy according to the “2020 Sustainable Energy in America Factbook”.

Google, for instance, is committing to buy power from Texas solar plants.

Neha Palmer, Google’s director of operations and head of energy strategy, observes that “[Texas] is a large, deregulated market. Users of electricity have a choice in who they buy electricity from and the type of energy that they buy. I think that’s been another driver of the large uptake of renewables in the state.”

The solar energy travels from the Permian Basin in west Texas, where much of the investment in solar energy is taking place, to cities such as Dallas and Houston aided by special transmission lines. The state of Texas authorized the lines 15 years ago. Designed to handle wind power, they are now enabling the flow of solar also.

Largely disconnected from the interstate transmission networks to the east and west of Texas, the grid is exempted from federal oversight. It is operated by the non-profit body Ercot (Electric Reliability Council of Texas.

“The Ercot power market is designed to be the ultimate competitive market,” Mr Archer says. Chris Archer, head of Americas at Macquarie’s Green Investment Group, a solar and wind developer with projects in Texas.

“Generators are only paid for the energy that they sell, not for having capacity at the ready. Wholesale prices that average about $40 per megawatt-hour are allowed to climb as high as $9,000 per MWh when demand surges on the hottest afternoons, a potential windfall for generators. Solar farms’ output crests when the sun is highest, enabling them to participate in these sales.” (FT)

As renewables grow as a percentage of the energy mix in Texas, and elsewhere, we will follow the evolution of the relationship between art, philanthropy, and energy.

See:

Ivan Penn, “Oil Companies Are Collapsing, but Wind and Solar Energy Keep Growing,” The New York Times, 7 April 2020, updated 8 April 2020

Gregory Meyer, “Texas: how the home of US oil and gas fell in love with solar power,” Financial Times, 7 April 2020

“2020, Sustainable Energy in America Factbook, Understanding the U.S. EnergyTransition,” the2020 edition of the Sustainable Energy in America Factbook – produced for the Business Council for Sustainable Energy by BloombergNEF

“The Museum of Fine Arts, Houston, Annual Report 2017 – 2018”

Richard D. Kinder, Kinder Morgan

Erin Douglas, “Museum of Fine Arts Houston director putting final brushstrokes on $450 million expansion,” Houston Chronicle, 7 June 2019

Carol Vogel, “Met Veteran Named Director of Houston Art Museum,” TheNew York Times, 1 December 2011

Stephanie Cash, “Gary Tinterow leaves the Met for Houston,” artnews.com, 1December 2011

Business Council for Sustainable Energy

BloombergNEF (Bloomberg New Energy Finance)

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coronavirus, climate change, the environment, & the arts: positive steps forward

“To my mind, one does not put oneself in place of the past; one only adds a new link.”

 Cy Twombly, quoted by Gagosian

“an elemental Dionysian force of madness rising, like a ‘fire that rises from the depths of the sea'”

Malcolm Bull, “Fire in the Water,” in Cy Twombly Bacchus Psilax Mainonmenos, exh. cat., New York, 2005, p. 55), quoted in Lot Essay, Cy Twombly (1928-2011), “Untitled” (acrylic on canvas, painted in 2005), Christie’s, Post-War & Contemporary Art Evening Sale, New York, 15 November 2017, Lot 15 B

Cy Twombly (1928-2011), “Untitled” (acrylic on canvas, painted in 2005). “Untitled” sold at the Christie’s Post-War & Contemporary Art Evening Sale of 15 November 2017 in New York realizing a price of US$ 46,437,500

Over ten feet high and sixteen feet in length, “Untitled” is the largest example from a group of giant-scaled paintings that Twombly created beginning in 2003 at age 75.

Twombly makes use of spirals of linear loops, culminating fifty years of regularly invoking scrawls, whirls, and writing/drawing.

“In his catalogue essay, “Fire in the Water” that accompanied the first exhibition of Twombly’s Bacchus series in 2005, Malcolm Bull argued that the abiding theme of these paintings was that of an elemental Dionysian force of madness rising, like a “fire that rises from the depths of the sea” (M. Bull, “Fire in the Water,” in Cy Twombly Bacchus Psilax Mainonmenos, exh. cat., New York, 2005, p. 55).’ – Lot Essay

Like Dionysian forces of madness, we are all experiencing the dislocation caused by the current COVID-19 pandemic.  

Individuals, families, supply chains, industries, markets, businesses, nations – all are affected.

This pandemic, however terrible, unexpected, and unprepared for, may in part be an outcome of behaviors that we have, however unwittingly, engaged in over decades.

We are all – individuals, peoples, cultures, animals, plants, functional objects and works of art, buildings, systems of transportation, agriculture, and education, etc. etc. etc. – inextricably embedded in nature. We are part and parcel of and subject to the forces of physics. Part and parcel of and subject to the elements and interactions of chemistry. 

As living, breathing creatures, moreover, and complex systems of systems. we are part and parcel of and subject to the complex forces of biology.  We are calibrated precisely, over long periods of time, to our biosphere.

If and should we take our biosphere for granted, fundamentally alter the composition of our atmosphere, and tamper with our climate, the unexpected can occur. Mayhem may let loose,

And so it has.

Yet, in the arts we are global. We reach across time, across space, across borders, across cultures, across nations. We represent mind and passion, interests and preferences. We come from an abundance of backgrounds and industries. 

We may lead, each in our own place, taking steps to realize our ambitions anew.

Together we will have impact.

While we work in our many spheres of activity, what steps, however simple, might we take to realize our objectives while mitigating risks of future such dislocations?

If we want “to do something to prevent disease emergence, first of all we need to seriously reconsider how we do business with the biosphere.”

“Q & A: A Harvard Expert on Environment and Health Discusses Possible Ties Between COVID and Climate,”

“We need to hear what nature is trying to tell us, which is clear: let’s be smarter about how we do business with the biosphere and stop disrupting the climate we depend on.” 

 Conversation on COVID-19 with Dr. Aaron Bernstein, Director of Harvard C-CHANGE”

Two recently published articles are insightful. In them, Dr. Aaron Bernstein, MD, MPH, Director of The Center for Climate, Health, and the Global Environment at Harvard’s T.H. Chan School of Public Health (Harvard C-CHANGE) offers guidance.

Please take a few minutes to read them in full:

Neela Banerjee, “Q & A: A Harvard Expert on Environment and Health Discusses Possible Ties Between COVID and Climate,” Inside Climate News, 12 March 2020

“A Conversation on COVID-19 with Dr. Aaron Bernstein, Director of Harvard C-CHANGE, ” Harvard C-CHANGE  

Excerpts follow, giving us some idea of what we probably already know but don’t always think about or consider in the decisions we make on a daily basis:

“The bottom line here is that if you wanted to prevent the spread of pathogens, the emergence of pathogens, … you wouldn’t transform the climate.”

“Q & A: A Harvard Expert on Environment and Health Discusses Possible Ties Between COVID and Climate,”

“The separation of health and environmental policy is a dangerous delusion. Our health entirely depends on the climate and the other organisms we share the planet with.”

“A Conversation on COVID-19 with Dr. Aaron Bernstein, Director of Harvard C-CHANGE”

Simply put, “The likelihood is high that this [a next pandemic] will happen. This has happened through human history but the data we have shows that the pace is accelerating. That’s not terribly surprising. We’re living in highly dense urban places. Air travel is much more prevalent than it used to be. And climate is a part of what is fundamentally reshaping our relationship with the natural world.”

“Q & A: A Harvard Expert on Environment and Health Discusses Possible Ties BetweenCOVID and Climate”

“You look at climate change, we have transformed the nature of the Earth. We have fundamentally changed the composition of the atmosphere, and, as such, we shouldn’t be surprised that that affects our health.”

“If you look at the emerging infectious diseases that have moved into people from animals or other sources over the last several decades,the vast majority of those are coming from animals. And the majority of those are coming from wild animals. We have transformed life onEarth. We are having a massive effect on how the relationships between all life on Earth operate and also with ourselves. We shouldn’t be surprised that these emerging diseases pop up.

“The principle is that we’re really changing how we relate to other species on Earth and that matters to our risk for infections.”

“Q & A: A Harvard Expert on Environment and Health Discusses Possible Ties Between COVID and Climate”

“Historically, we have grown as a species in partnership with the plants and animals we live with. So, when we change the rules of the game by drastically changing the climate and life on earth, we have to expect that it will affect our health.”

“A Conversation on COVID-19 with Dr. Aaron Bernstein, Director of Harvard C-CHANGE”

How might we in our private and business capacities be smarter about how we do business with the biosphere and stop disrupting the climate we depend on?

First, think.

All industries, markets, and economies, including the arts, the art market, and the art economy, are interconnected and all are viable only within our shared biosphere.

“Art” is not self-existent. Art as a phenomenon, culture as a phenomenon, works of art, cultures, collections of works of art, collectors, and all parties to art are inextricably embedded in and dependent on nature.

Take time and steps to learn about and understand the biosphere. Take steps to reconsider how we, in every sphere of work and activity, do business with the biosphere.

We have an opportunity to consider ways to optimize connections, culture, art, the business of art, and the biosphere jointly.

Some simple steps that can be taken:

Minimize travel

Whether curator, museum director, staff, or trustee, collector, dealer, gallerist, advisor, interested party – vet travel requirements.

Minimize travel powered by combustion of hydrocarbons.

“We need to drastically decrease our greenhouse gas emissions from fossil fuels like coal, oil and natural gas.”

“A Conversation on COVID-19 with Dr. Aaron Bernstein, Director of Harvard C-CHANGE”

It goes without saying that travel by foot or by bike is encouraged. Travel by electric-powered cars, buses, and trains – especially insofar as the electricity is generated from renewable, non-hydrocarbon sources – is also encouraged.

Amsterdam-based art dealer Jan Six XI, for instance, bikes to and from work, and across town to consult with experts. (Russell Shorto, “Rembrandt in the Blood: AnObsessive Aristocrat, Rediscovered,” The New York Times Magazine, 27 February 2019)

Work with local partners

We are all somewhere. We do not need to be everywhere.

If you need to do work or close a transaction somewhere else, research, identify, vet, and work with local partners.

Optimize resources and connections made available online

Information, images, and opportunities to meet and discuss face-to-face, even in groups, abound online. As we are now seeing in abundance, education and research can be conducted online. Relationships developed through written and verbal communications optimized online, by mail (even mail that goes through the post office), and by telephone.

As much activity is migrating online, vet also your online service partners and their delivery options.

This website, for instance, is hosted by AISO.net. AISO.net is powered 100% by solar energy generated on site. The company does not make use of carbon credits. Members of staff are knowledgeable, of course, very personable, and extraordinarily helpful. They are great to work with.

Reduce carbon dioxide and greenhouse gas emissions from ongoing operations of physical plants

Galleries,museums, homes, businesses, offices, schools and universities, hotels,hospitals – all house works and collections of art.

Real-life steps can be taken to reduce use of hydrocarbon-based energy sources and achieve net-zero energy.

Expert and experienced stakeholders including architects, engineers, designers, builders, energy consultants, and sources of finance are able and ready to assist.

Information about service providers will follow.

Amsterdam’s Van Gogh Museum can serve as a model. The Van Gogh Museum operates 100% on renewable (wind)energy. (See Van Gogh Museum, sustainability, and accompanying infographic.)

Change habits of mind and behavior

Allow time for foot and bike travel. Schedule meetings and work requirements accordingly. 

Enjoy the great outdoors en route to work, home, meetings, and shopping.

Enjoy your locality

See:

Cy Twombly (1928 – 2011), “Untitled” (acrylic on canvas, painted in 2005), Christie’s, Post-War & Contemporary Art Evening Sale, New York, 15 November 2017, Lot 15 B 

“Coronavirus, climate change, and the environment, A Conversation on COVID-19 with Dr. Aaron Bernstein, Director of Harvard C-CHANGE”, Harvard C-Change, 20 March 2020

Aaron Bernstein, MD, MPH, C-Change,Center for Climate, Health, and the Global Environment, Harvard T.H. Chan School of Public Health

Neela Banerjee, “Q&A:A Harvard Expert on Environment and Health Discusses Possible TiesBetween COVID and Climate,” Inside Climate News, 12 March 2020

Russell Shorto, “Rembrandt in the Blood: An Obsessive Aristocrat,Rediscovered,” The New York Times Magazine, 27 February 2019

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Art Basel to Offer Online Viewing Rooms

As latent risks emerge, industry, business, and individuals adapt. Opportunities, and benefits, are discovered in and developed from such adaptation. Opportunities and benefits are discovered also in forward-looking mitigation.

Inaugurated in 1970 by Basel gallerists Ernst Beyeler, Trudi Bruckner and Balz Hilt, owned and managed by Switzerland-based MCH Group, art fair giant Art Basel, facing health, travel, and concomitant business risks posed by the emergent Covid-19 virus, cancelled Art Basel Hong Kong 2020.

The Art Basel fairs, offered in Basel, Miami Beach, and Hong Kong, have succeeded as an effective venue for introducing galleries, works of art, and collectors to each other.

The fairs, while offering face-to-face interactions, are, however, premised on travel, often long-distance. The fairs are premised further on the gathering of large numbers of people together in one place at one time.

The travel and costs (staff, booth rentals, insurance, hotels and lodging, shipping of works of art, …) involved with the fair – and the many art fairs that have developed over the years – are expensive for galleries and collectors alike.

The travel, further, can increase risk. Combustion of hydrocarbon-based fuels releases carbon dioxide into the atmosphere. 

Carbon dioxide molecules are precisely calibrated to attract and retain, in our atmosphere, photons of thermal energy that reach the earth from the sun. (See infographic.) Increasing levels of carbon dioxide in our atmosphere leads therefore to greater thermal energy (heat) in the atmosphere.

Acidification of the oceans, that themselvesabsorb about 30% of the carbon dioxide released into the atmosphere, also takes place.

Increased atmospheric heat leads to consequences such as melting of arctic permafrost, melting of glaciers, sea level rise, fires, storms, the release of pathogens and concomitant health risks. (See infographic developed by Zurich-based reinsurance giant Swiss Re.)

 With regard to large numbers of people gathering together in one place at one time, this currently may pose a risk of transmission of the emergent coronavirus (COVID-19).

To reduce such risk, the Swiss Federal Council, on 28 February 2020, issued an ordinance forbidding the holding of public or private events in Switzerland where more than 1,000 people are present at the same time.

MCH Group has, accordingly, not only cancelled Art Basel Hong Kong 2020 but has also postponed further events and trade shows such as the Baselworld Watch and Jewellery Show 2020 (until January-February 2021), the garden exhibition Giardina in Zurich, and Habitat-Jardin in Lausanne.

Fortunately there are means of bringing galleries, works of art, and collectors together that are premised neither on long-distance travel nor on the gathering in one place of multitudes of people.

Art Basel has been developing such a means, an initiative that, as “the art market continues to evolve, exemplifies its longstanding commitment to fostering a healthy art world ecosystem by creating new ways for its galleries to reach collectors from across the globe.”

The initiative is a digital-only platform for Art Basel’s galleries and collectors. The inaugural edition of Art Basel’s Online Viewing Rooms are planned to go live on 20 March 2020.

“Online Viewing Rooms will give visitors the opportunity to browse thousands of artworks presented by Art Basel participating galleries, many of which will be online exclusives. The exhibiting gallery can then be contacted directly for sales inquiries. The Viewing Rooms will run in parallel to the three shows in Basel, Miami Beach, and Hong Kong.”


“Art Basel to launch Online Viewing Rooms,” Art Basel

While recognizing “’the essential personal interactions that continue to underlie the  art market,’” Art Basel Global Director Marc Spiegler notes that “’the Online Viewing Rooms will provide galleries with a further possibility for engaging with our global audiences.'”

All the galleries that were accepted for the cancelled 2020 Art Basel Hong Kong have been invited to participate, at no cost, in the launch of the Online Viewing Rooms.

Art Basel is not the first to organization to provide a means for galleries, works of art, and collectors to meet online. New York-based Artsy has been doing so for several years.

The process of selecting works of art, acquiring them, and developing a collection requires intent, effort, patience, and work. Such work is conducted in increments over a long-term.

Relationships of mutual trust and reliance, between collectors, galleries, and dealers, some private, are developed.

Qualifications of all parties are established. Buyers and sellers alike vet each other for acknowledgement and understanding of contract law as well as willingness to agree and adhere to contractual terms.

As works of art are identified for purchase, high-resolution images taken from multiple angles can be shared. Condition reports, provenance, and valuations provided.

The process enables collectors to learn and value not only the aesthetic, historical, and, increasingly, financial qualities of such works of art but also the supply chain logistics.

Supply chain logistics are themselves complex, often crossing cultures, history, collections, sovereign entities such as cities, states, and nations, and laws.

Supply chain logistics and the logistics of collections management evolving to include collaborations not only with art professionals but also with those with in a variety of industries. These industries include science, tech, law, engineering, energy, water, design, architecture, finance, and, insurance.

Insurance especially in a new iteration: in regard to transparent, data-driven identification of risk together with public/private collaborations structured to foster preemptive mitigation of risk.

See:

“Art Basel to launch Online Viewing Rooms,” Art Basel

Anny Shaw, “MCH Group postpones Baselworld watch fair as Swiss authorities ban large events over coronavirus fears,” The Art Newspaper, 28 February2020

Christian Jecker, “MCH Group postpones forthcoming events,” MCH Group Media Release, 28 February 2020

“Carbon Dioxide Absorbs and Re-Emits Infrared Radiation,” UCAR Center for Science Education

Swiss Re, “Special Feature: It’s existential – climate change and life & health,” 22 May 2019

NOAA, “Ocean Acidification”

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Acknowledging risk, Sotheby’s revises 2020 Hong Kong Spring Sale

“Monitoring the impact of the Covid-19 virus and the resulting travel restrictions” – in effect acknowledging, and attempting to manage, the health, travel, and business risks that the coronavirus poses – Sotheby’s has revised its 2020 Hong Kong Spring Sale.

The Modern Art Evening Sale, the Contemporary Art Evening Sale, and the Contemporary Art Day Sale will take place in New York on 16 April.

Further 2020 Hong Kong Spring sales have been re-scheduled from April to July. The plan is that they will take place in Hong Kong.

The revised schedule can be found here: “Revised Schedule For Sotheby’s Hong Kong 2020 Spring Auction Series Announced.”

Sotheby’s publishes a message from Kevin Ching, CEO of Sotheby’s Asia:

“We have been closely monitoring the impact of the Covid-19 virus and the resulting travel restrictions.

“After careful consideration and reflection on nearly 50 years of working with our clients in Asia, we have made the strategic decision to continue to hold our major Modern and Contemporary Art auctions in April but relocate them to New York and to postpone the balance of our spring auctions to early July in Hong Kong.

“April in New York represents the best possible venue and timing for our consignors of Modern and Contemporary art. We have scheduled these sales at times that will make it easy for our clients in Asia to participate and our global team stands ready to activate the international market for the great works of art we have assembled.

“Similarly, given the nature of the property and collectors in our other categories, we have decided to postpone those auctions until early July when we can safely hold a traveling exhibition across Asia and present our sale week in Hong Kong.”

Kevin Ching, CEO, Sotheby’s Asia

See:

“Revised Schedule for Sotheby’s Hong Kong Spring Auction Series Announced,” Sotheby’s, 24 February 2020

“Revised Schedule For Sotheby’s Hong Kong 2020 Spring Auction Series Announced” and “Sale Calendar,” Sotheby’s

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is sexy really a measure?

With Art Basel Hong Kong 2020 cancelled, art institutions and openings in China delayed, important spring art auctions in New York postponed, New York’s Art Week 2020 postponed, private museums closing, travel impeded by the COVID-19 virus, wildfires raging in Australia, and floods in Venice, we may rightly ask what the heck is going on.

Henry Moore: Two Piece Reclining Figure No. 5

Behaviors and institutions that we may have taken for granted – art fairs, travel, museums, museum openings, art loans, traveling exhibitions, gallery openings, the buildings that house works and collections of art, cities, heritage – show themselves as vulnerable.

Vulnerable to various risks – geopolitical, natural (flood, fire), illness, travel (viruses are clever particles, requiring host cells in order to replicate; when host cells travel, so do viruses), funding, disengagement, generational change, wrongdoing, and “art-washing” among them.

“In a country where there has always been more space than people, where the land and wildlife are cherished like a Picasso, nature is closing in. Fueled by climate change and the world’s refusal to address it, the fires that have burned across Australia … are forcing Australians to imagine an entirely new way of life.”

(Damien Cave and Matthew Abbot writing in The New York Times, The End of Australia as We Know It, 15 February 2020)

“Buildings are deteriorating faster than ever before. It’s indicative of the changing environment and climate.”

Syfur Rahman, Department of Archeology of Bangladesh, quoted in
“Heritage on the Edge, How people around the world are protecting their cultural sites against climate change,” Google Arts & Culture in collaboration with CyArt and ICOMOS

“Our shared history is at risk”

(“Heritage on the Edge, How people around the world are protecting their cultural sites against climate change,” Google Arts & Culture in collaboration with CyArt and ICOMOS)

The thousand-year equilibrium long maintained in Venice may, in the space of a century, have been destroyed. With little regard for the safeguards balance provides, risks of flooding, loss of habitats, and loss of livelihoods are increasing.

Venice is “a city that for over a thousand years has built a wonderful equilibrium between a human component, ecological component, art, nature. And in the last century, we have basically almost destroyed that balance.”

(Shaul Bassi, director of the Center for Humanities and Social Change at Ca’ Foscari University of Venice, quoted in Sylvia Poggioli, “With Waters Rising And Its Population Falling, What Is Venice’s Future?”, NPR, 30 November 2019).

In the face of protests, coronavirus, and the cancellation of Art Basel Hong Kong 2020, Tim Schneider of Artnet News asks

“Did the coronavirus merely provide a politically agnostic opportunity to call off an event that many Western exhibitors alleged had already lost viability after the ongoing pro-democracy protests convinced a significant number of their buyers and artists to opt out months earlier? 

“And if so, did the organization take until February 6 to decide strictly because its international galleries were facing shipping deadlines? Or was something else entirely at work?”

He suggests that

“To decipher the answers, it turns out that we may have to look in what many, if not most, people view as the single unsexiest realm of arcana in the entire art market: insurance policies.”

(Tim Schneider, “The Gray Market: Why the Coronavirus Canceled Art Basel Hong Kong When the Protests Couldn’t (and Other Insights),” Artnet News, 10 February 2010)

Is sexy really a measure? Is insurance so arcane?

Let’s for a moment look at insurance, and risk, from another angle: able to track perils in real time, Swiss Re is changing the way it understands and models risk. Assessing risk and underwriting risk using real-time data rather than past data, Swiss Re will offer insurance products structured not only as ex ante compensation products but also as anticipative risk management services.

“With new insights from an ability to track perils in real time, we are able to change the way we model and understand risk. This will allow new means of risk assessment and underwriting, augmenting our traditional process of using past data. These shifts will see the nature of insurance products begin to change from ex ante compensation packages to anticipative risk management services.”

(“Underwriting: The Next Generation,” Edi Schmid, Chairman Swiss Re Institute and Group Chief Underwriting Officer, 30 April 2019)

Real value may be developed through collaboration with stakeholders, public and private, globally, together with expertise and capital offered by organizations such as Swiss Re.

What are forward-looking modeling and understanding of risk? What might a shift from ex ante compensation packages to the provision of anticipative risk management services enable?

How might long-term value be developed while using real-time data to anticipate and manage risk?

Let us work to better understand risk and risk management. We might then position ourselves to better enable long-term protections of works and collections of art together with the heritage, information, and value they represent.

See:

“Virus,” Science Daily

“Underwriting: The Next Generation,” Edi Schmid, Chairman Swiss Re Institute and Group Chief Underwriting Officer, 30 April 2019,

Damien Cave and Matthew Abbott, “The End of Australia as We Know It,” The New York Times, 15 February 2020

Georgina Adam, “Not here to stay: what makes private art museums suddenly close,” The Art Newspaper, 13 February 2020

Elizabeth A. Harris, “As Virus Tightens Grip on China, the Art World Feels the Squeeze,” The New York Times, 13 February 2020

“‘You Want to Pull Your Hair Out’: Artists and Gallerists Respond to the Long-Awaited Cancellation of Art Basel Hong Kong,” Ysabelle Cheung, Artnet News, 7 February 2020

Tim Schneider, “The Gray Market: Why the Coronavirus Canceled Art Basel Hong Kong When the Protests Couldn’t (and Other Insights),” Artnet News, 10 February 2020

Alexander Walter, “Opening of Tadao Ando’s He Art Museum in China delayed due to coronavirus fears,” Archinect, 3 February 2020

“Heritage on the Edge, How people around the world are protecting their cultural sites against climate change,” Google Arts & Culture in collaboration with CyArt and ICOMOS

Sylvia Poggioli, “With Waters Rising And Its Population Falling, What Is Venice’s Future?”, NPR, 30 November 2019

Image: Henry Moore’s “Two Piece Reclining Figure No. 5” (bronze, 1963-1964) overlooking the Øresund at the Louisiana Museum of Modern Art, Humlebæk, Denmark. Donated to the museum by the Ny Carlsbergfondat.

 

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your money, your life, your choice ・ Harvard invests in water

“‘Because we believe its physical products are going to be in increasing demand in the global economy over the coming decades,”

Harvard Management Co., the Harvard University endowment manager, likes the natural-resources asset class.

“In a warming planet, few resources will be more affected than water, as droughts, storms and changes in evaporation alter a flow critical for drinking, farming, and industry.

“Even though there aren’t many ways to make financial investments in water, investors are starting to place bets.

“Buying arable land with access to it is one way.

“In California’s Central Coast, ‘the best property with the best water will sell for record-breaking prices,’ says JoAnn Wall, a real-estate appraiser specializing in vineyards, ‘and properties without adequate water will suffer in value.'”

The Harvard Management Co. has, since 2012, been buying agricultural land, with rights to sources of water, on California’s Central Coast. The idea was pitched to Harvard by agricultural investment advisory firm Grapevine Capital Partners LLC, founded by Matt Turrentine, formerly of his family’s Central Coast grape-brokerage business, and James Ontiveros, a local vineyard manager.

“Harvard’s investing guidelines say respecting local resource rights are of increasing importance ‘in the coming decades as competition for scarce resources, such as arable land and water, intensifies due to increasing global population, climate change, and food consumption.’”

“Investors who see agriculture as a proxy for betting on water include Michael Burry, a hedge-fund investor who wager against the U.S. housing market was chronicled in the book and movie ‘The Big Short.’ In a 2015 New York Magazine interview, Mr. Burry was quoted as saying: ‘What became clear to me is that food is the way to invest in water. That is, grow food in water-rich areas and transport it for sale in water-poor areas.'”

“In California vineyards, the water-proxy math is compelling. When grapes are harvested, about 75% of their weight is water. Owning vineyards effectively turns water into revenue.”

“Kat Taylor, an environmentalist and wife of hedge-fund billionaire and liberal activist Tom Steyer, resigned earlier this year from Harvard’s board of overseers in protest of the endowment’s investments in things such as fossil fuels and water holdings she says threaten the human right to water.

“‘It may, in the short run, be about developing vineyard properties,’ she says of Harvard’s California investments. ‘In the long run, it was a claim on water.'”

See:

“Harvard Amasses Vineyards – and Water. A bet on climate change in California gives it agricultural land and the rights below it,” Russell Gold, The Wall Street Journal, 11 December 2018

“In Drought-Stricken Central California, Harvard Hopes to Turn Water Into Wine,” Eli W. Burnes and William L. Wang, The Harvard Crimson, 13 April 2018

“Michael Burry, Real-Life Market Genius From The Big Short, Thinks Another Financial Crisis Is Looming,” Jessica Pressler, New York Magazine, 28 December 2018

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the compounding costs of California’s year-after-year wildfires

The compounding costs of California’s year-after-year wildfires are making it increasingly difficult for any party to absorb the expenses.

So observes Mark Cooper, Yale PhD, former Yale University and Fulbright Fellow, and Senior Research Fellow for Economic Analysis at the Institute for Energy and the Environment of Vermont Law School currently working on Energy Assessment.

PG&E electrical equipment, including power lines and poles, has been found to be responsible for at least 17 of 21 major Northern California fires of autumn 2017.

While the cause of California’s Camp Fire has not yet been determined, PG&E, one of California’s largest utilities, disclosed to the SEC on 9 November that an outage and damage to a transmission tower were reported in the area shortly before the fire started.

In the SEC Form 8-K of 9 November, PG&E declared that it may face billions of dollars in potential liabilities, far more than its insurance would cover, for the wildfires of 2018.

The Form 8-K reads, in pertinent part:

On November 8, 2018, a wildfire began near the city of Paradise, Butte County, California (the “Camp Fire”), located in the service territory of the Utility.  The California Department of Forestry and Fire Protection’s (“Cal Fire”) Camp Fire Incident Report dated November 13, 2018, 7:00 a.m. Pacific Time (the “incident report”), indicated that the Camp Fire had consumed 125,000 acres and was 30% contained.  Cal Fire estimates in the incident report that the Camp Fire will be fully contained on November 30, 2018.  In the incident report, Cal Fire reported 42 fatalities.  The incident report also indicates the following: structures threatened, 15,500; single residences destroyed, 6,522; single residences damaged, 75; multiple residences destroyed, 85; commercial structures destroyed, 260; commercial structures damaged, 32; and other minor structures destroyed, 772.

The cause of the Camp Fire is under investigation. On November 8, 2018, the Utility submitted an electric incident report to the California Public Utilities Commission (the “CPUC”) indicating that “on November 8, 2018 at approximately 0615 hours, PG&E experienced an outage on the Caribou-Palermo 115 kV Transmission line in Butte County. In the afternoon of November 8, PG&E observed by aerial patrol damage to a transmission tower on the Caribou-Palermo 115 kV Transmission line, approximately one mile north-east of the town of Pulga, in the area of the Camp Fire. This information is preliminary.” Also on November 8, 2018, acting governor Gavin Newsom issued an emergency proclamation for Butte County, due to the effect of the Camp Fire.

As previously reported, during the third quarter of 2018, PG&E Corporation and the Utility renewed their liability insurance coverage for wildfire events in an aggregate amount of approximately $1.4 billion for the period from August 1, 2018 through July 31, 2019. For more information about wildfire insurance and risks associated with wildfires, see PG&E Corporation and the Utility’s quarterly report on Form 10-Q for the quarter ended September 30, 2018.

While the cause of the Camp Fire is still under investigation, if the Utility’s equipment is determined to be the cause, the Utility could be subject to significant liability in excess of insurance coverage that would be expected to have a material impact on PG&E Corporation’s and the Utility’s financial condition, results of operations, liquidity, and cash flows.

United States Securities and Exchange Commission, Form 8-K, filed by PG&E on 9 November 2018

Citigroup estimates that PG&E’s exposure to liability for at least 17 of 21 major Norther California fires that took place in autumn 2017 is $15 billion. Citigroup estimates further that if it is found responsible for the Camp Fire, PG&E could face another $15 billion in claims. This number could rise, the fire is as yet only partially contained.

PG&E’s customers, both business and residential, may find themselves responsible for covering the bill for the company’s liabilities through higher costs.

California state  legislators took steps this year to shield PG&E and the state’s other investor-owned utilities from overwhelming legal claims, allowing them to pass the expense on to ratepayers.

California Senate Bill 901, signed into law on 21 September 2018, applies to fires beginning in 2019, and to some that occurred in 2017.

The bill enables utilities to sell bonds to cover liability costs and pay them off over time through higher rates.

(14) The existing restructuring of the electrical services industry provides for the issuance of rate reduction bonds by the California Infrastructure and Economic Development Bank for the recovery of transition costs, as defined, by electrical corporations. Existing law authorizes the PUC to issue financing orders, to support the issuance of recovery bonds, as defined, by the recovery corporation, as defined, secured by a dedicated rate component, to finance the unamortized balance of the regulatory asset awarded Pacific Gas and Electric Company in PUC Decision 03-12-035.

This bill would, under specific circumstances, authorize the PUC, upon application by an electrical corporation, to issue financing orders to support the issuance of recovery bonds to finance costs, in excess of insurance proceeds, incurred, or that are expected to be incurred, by an electrical corporation, excluding fines and penalties, related to wildfires, as provided.

SB 901, Dodd. Wildfires.

PG&E’s company shares dropped by more than 20 percent yesterday (Wednesday). More than half of its market value has been lost since late last week as the fires have spread.

Shares of other investor-owned utilities in California, Edison International (operated Southern California Edison) and Sempra Energy (owns San Diego Gas and Electric), dropped earlier this week.

California’s power supply is likely not to be at risk. PG&E could face bankruptcy if it cannot cover the liabilities it faces. Such a bankruptcy would eliminate shareholders’ equity and affect bondholder investments.

See:

“California Utility Customers May Be on the Hook for Billions in Wildfire Damage,” Ivan Penn and Peter Eavis, The New York Times, 14 November 2018

SEC Form 8-K filed by PG&E, dated 9 November 2018

California Senate Bill No. 901

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collections care & engineered resilience

As the markets for works of art, collections care, and engineered resilience in the built environment (private collections, museums – public and private, galleries, fairs, corporate and university collections, etc.) converge, renewable energy will be a factor.

“Underlying property increases in value by virtue of the fact that positive externalities associated with the performance of the resilience investments represents a superior outcome to the status quo – even when netted out by any costs.” (Keenan et.al.)

Companies have signed long-term contracts to purchase solar and wind energy in 28 markets.

Cost declines and efficiency improvements are making renewables cost-competitive with wholesale power prices of more traditional sources of electricity.

While larger corporations are entering into corporate power purchase agreements (PPA),

smaller companies are increasingly pooling electricity demand together to access economies of scale achieved through solar and wind projects.

This is called “aggregation.”

“Aggregation” might be a workable model for entities in the art market concerned about the long-term resilience of structures and care and value of works and collections.


See: 1) Jesse M. Keenan, Thomas Hill, Anurag Gumber, “Climate Gentrification: From Theory to Empiricism in Miami-Dade County,” IOPScience, 23 April 2018; 2) “Corporations Already Purchased Record Clean Energy Volumes in 2018, and It’s Not an Anomaly,” Bloomberg New Energy Finance, 9 August 2018

 

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