31 Jul 2019
For business there is no more pressing issue than climate change
This blog is based upon the first of two articles which appeared in Forbes.com on 27 and 28 July 2019.
The global community widely recognises that we need to limit global warming to 2°C to reach net zero carbon emissions by 2050. We’ve been warned by the UN that we’d be better off still holding to a 1.5°C target—this would mean tens of millions fewer people exposed to life-threatening heatwaves, water shortages and coastal flooding. But whichever way you slice it, government action is not going to achieve this.
Bringing the environment back from the edge of the precipice would involve huge government spending— higher taxes and/or more debt would be unavoidable. The simple fact is that markets have access to funds that dwarf those available even to free-spending governments, and much of it is earning very low returns. Indeed, around $12 trillion globally is invested at negative interest rates.
Surely any return, including a return from green investment, looks attractive in comparison. So there does not have to be a zero-sum game between doing good and being commercial, nor do we have to rely on the government’s capacity to tax, print and spend money.
Business is increasingly aware of the need to limit carbon emissions, and has been on a path to do something about it. There are more and more examples of markets and technology delivering solutions to decarbonising the environment—cheap solar energy, nuclear fusion, battery technologies, and increasingly useful electric vehicles that will become more affordable than internal combustion vehicles, to name just a few.
This investment can—and should—come from businesses rather than from taxpayers and cash-strapped governments. Companies need to lead remediation efforts—or at minimum, slow down the process of making the earth uninhabitable.
And it’s also in companies' best interest to shift to a 2°C trajectory, or face being left with "stranded assets" such as coalfields, oil reserves, and water intensive crops. One report found that 60% to 80% of coal, oil and gas reserves held by public companies are “unburnable” if they are to remain within the 2°C limit.
For business, and especially for big companies with capital and the vision to use it wisely, there is no more pressing issue or greater opportunity than climate change. A rise in temperature of more than 2°C would mean climactic catastrophe. To do nothing and simply extrapolate from today’s business position implies a 4°C rise with enormous consequences.
Climate crisis is not the same as financial crisis, where a bank bailout can plug the holes of a recession until the market rebalances itself. Climate crisis requires massive intervention with debt, equity and insurance players all stepping up, supported by policy and regulatory changes within an inclusive capitalism framework.
The government's role, meanwhile, is to nudge business along. Consumers will support these initiatives... after all, who doesn't want cheaper heating or transport?