European Court Rules Climate Change Policy Violates Human Rights

In a landmark decision, the European Court of Human Rights ruled that Switzerland violated its citizens’ “human rights” by insufficiently combatting climate change. The court’s justification for the ruling is that the Swiss government failed to implement a national carbon budget and did not achieve its target for cutting greenhouse gas emissions. According to the court, these policy choices failed to protect the women from “the serious adverse effects of climate change on lives, health, well-being and quality of life.” This ruling will allow other plaintiffs to sue their governments over their climate policies, and the ruling cannot be appealed because it is a binding precedent for all signatories to the European Convention on Human Rights. There is already a lawsuit before the same court from Norway where citizens claim their “human rights” were violated because the government issued licenses for oil and gas exploration in the Barents Sea post-2035. The case came about because more than 2,000 Swiss women who are 64 and older from the group Senior Women for Climate Protection claimed that Switzerland’s climate policies put them at risk of death during heat waves, and their argument focused on their age and gender (typically protected classes).

Court President Siofra O’Leary said, “It is clear that future generations are likely to bear an increasingly severe burden of the consequences of present failures and omissions to combat climate change.” For example, the Barcelona Institute for Global Heath claimed that there were more than 61,000 heat-related deaths during the summer of 2022. The European Court of Human Rights’ ruling creates high political risks for corporations because it essentially abrogates the ability for national governments to implement policies that they believe are best for citizens. Regulations will effectively be imposed by a centralized judiciary that also does not allow appeals to its rulings. The novel justification used by the court could allow citizens to claim corporations violate their “human rights” because of their own policies or by operating factories or producing goods.

Ecuador Invades Mexican Embassy to Arrest Former VP

On April 5, former Ecuadorian Vice President Jorge Glas was arrested at the Mexican embassy in Quito after national police stormed into the building. The method by which the Ecuadorian government decided to capture Glas was one of the gravest violations of international law and sovereignty. Ecuador and Mexico have had several diplomatic issues recently, and this culmination has extremely broad geopolitical implications. Mexican President Andrés Manuel López Obrador indefinitely suspended diplomatic ties with Ecuador, and several Latin American countries are rallying to support Mexico. Importantly, the support came from both left-wing and right-wing governments, such as Nicaragua, Brazil, Colombia, Honduras, and Argentina. There was broad agreement that this violation of the Vienna Convention on Diplomatic Relations was harmful to international relations for everyone. Embassies are considered sovereign territories of the countries they represent, and Ecuador essentially invaded Mexico to arrest Glas. This incident is highly unlikely to go beyond severed diplomatic ties, but it demonstrates the geopolitical risks when countries experience significant issues. Ecuador is experiencing significant violence from gangs, and President Noboa is up for reelection next year. Noboa needs to demonstrate strength, which is why he is willing to violate one of the most important international norms. Corporations need to consider such risks when operating in countries where the government is willing to defy their own self-interests to remain in power.

Germany Expands Military Cyber Defense Against Russia

Germany has decided to create a military branch dedicated to cyberwar as part of its overall restructuring of defense, specifically to contain Russian aggression towards NATO members. The expanded Cyber and Information Domain Service (CIR) will be the fourth independent branch of the German armed forces (Bundeswehr) and combine previously separate domestic and foreign commands. This is related to Germany’s overall change in posture in which they are trying to reach the NATO requirement to spend 2% of GDP on defense. Cyber defenses are generally increasing in Europe because of the Russian threat. Six European nations have also established an agreement to protect underwater infrastructure. Belgium, Denmark, Germany, Norway, the Netherlands, and the UK all have maritime borders with the North Sea where major undersea cables and telecommunications networks operate. NATO intelligence has already indicated undersea cables are credible targets for Russia in the overall Ukrainian war. Russian aggression has fundamentally changed the European theater, and Moscow’s extensive cyber capabilities are a persistent threat to both nation-states and the private sector. If European countries are taking cybersecurity more seriously and willing to commit the resources necessary, then this will likely have a positive impact in containing Russia over the medium term.

Data Privacy Law Introduced in Congress

Bipartisan legislation has been introduced into the US Congress by Senator Maria Cantwell (D-WA) and Representative Cathy McMorris Rodgers (R-WA) that would create a comprehensive federal data privacy regulatory framework. The legislation would make privacy a consumer right, prevent the transfer and sale of consumer data without explicit consent, and stop targeted advertising without consent. Small businesses not involved in the sale of personal data will be exempt from the legislation. There would be some positives but mostly negatives from the legislation for the American technology sector. Corporations will benefit from federal legislation creating uniformity across the country rather than dealing with patchwork regulations. However, it would harm the overall tech sector in several ways. First, it would break the primary way that technology and social media companies make money, meaning that companies are more likely to start charging for more services to make up for the decline in revenue. Second, it would create complex regulations akin to GDPR in Europe that strain technological development. The United States will also risk losing its relative position against China with corporations potentially having less capital to invest in innovation.

Generative AI Used for Influence Operations

Microsoft Threat Intelligence published a report on China-linked influence operations using generative AI in the US and Taiwan, involving similar tactics to Russia during the 2016 US election. The tactics are intended to aggravate existing controversial domestic and social issues by creating visual content to incite conflict. For example, a threat actor group tried to manipulate public sentiment by creating AI-generated audio clips featuring a Taiwanese presidential candidate. The observation of a nation-state actor using AI for foreign election interference matters due to general political risks. There were expectations that generative AI would become part of disinformation campaigns, and it appears that it has now begun. North Korea is also using generative AI to enhance their cyberattack capabilities, increasing the need for governments and corporations to improve their cybersecurity. As such, companies like Meta are altering their rules on deepfakes and altered media. Beginning in May 2024, Facebook will apply "Made with AI" to AI-generated videos, images, and audio posted on its platforms. Corporations will need to establish risk strategies to manage disinformation from generative AI for everything from cybersecurity to reputational warfare.

Municipal Governments Face Cyberattacks

Municipal governments face persistent threats from ransomware incidents and cyberattacks, and even major cities face such threats. Within Q1 2024, there have already been dozens of attacks on local governments, including New York City where the government had to take down the city payroll website due to a phishing incident. Most local governments lack the capacity and resources to successfully prevent such attacks, and they lack the resiliency to mitigate the fallout. Attacks on municipal governments threaten public services, such as healthcare, utilities, and law enforcement, creating significant incidental risks to the private sector. Without local governments finding a way to bolster resources and capabilities, such attacks are extremely likely to continue and expand over the medium term.

Greece’s Population Decline Emblematic of Europe’s Demographic Problems

Greece has now become emblematic of the major demographic challenges Europe is facing that will harm their long-term economic capabilities, especially because the country has been incapable of reversing the trend. In 2022, Greece recorded the lowest number of births in 92 years likely due to the debt crisis, austerity, emigration, and anti-natalism of the younger generations. While Greece has the lowest birthrates in Europe, the rest of the continent is headed in that direction sans immigration. The Greek government is hoping to reverse the trend with new policies, such as cash benefits for families, affordable housing, financial incentives for reproduction, and more pro-immigrant policies. Similar policies in other European countries have failed to increase native-born populations. If European countries do not significantly increase immigration, then their demographics will continue to decline, and their economies will suffer as there will be an insufficient number of young workers to fill jobs or fund social service programs. Foreign investment on the continent must consider this issue for long-term market operations.

US Inflation Stops Declining

The Federal Reserve is increasingly unlikely to cut interest rates in the medium term as US inflation continues to be significantly higher than the 2% target. Target inflation rates are intended to help with the stabilization of prices, which is important for long-term economic growth. Although inflation decreased initially in 2024, the new consumer price index showed that the annual rate of inflation increased from 3.2% to 3.5% with core inflation being at 3.8%. Inflation is highly unlikely to decline significantly over the next two quarters due to geopolitical and structural issues, such as the collapse of the Francis Scott Key Bridge in Maryland that will disrupt the supply chain on the East Coast. Corporations should continue to operate with the understanding that interest rates are highly unlikely to be cut until the end of 2024, more likely 2025.