Investor Leadership On Climate Change

Source: Investor Leadership On Climate Change, An analysis of the investment community’s role on climate change, and snapshot of recent investor activity.

By UN Global Compact; UN Environment Programme Finance Initiative; Principles For Responsible Investment

Synopsis: Analysis of risk and opportunity regarding climate change is incomplete without considering the role of investment in the process of mitigation. Investor Leadership on Climate Change explores the relationship between climate change and investment.

Reflection:

Most of the talk surrounding anthropogenic climate change (ACC) deals with risk. If we don’t do this, this is what’s gonna happen. The flipside of that coin is opportunity, which gets talked about, but not as much. Most of that talk centers around business and employment opportunities, such as startup businesses in green energy and the jobs those businesses could create. That’s true, and it’s all well and good, but change on the scale necessary doesn’t happen without money. Lots and lots of money.

We’ve talked about investment before (Who Cares Wins) and the fundamental question of that document is also the fundamental question addressed by this one: why wouldn’t sustainable businesses be good investments? Investor Leadership On Climate Change takes it one step further, narrowing down the scope to look specifically at the relationship between investment and ACC.

And really, that relationship isn’t complicated. Accepting that Business As Usual is not sustainable and is in need of an overhaul, we’re looking at developing new technology, training and re-training staff, creating new and renovating existing infrastructure, etc. As much as we like stories of the American Dream, hauling ourselves up by our bootstraps, mom-and-pop businesses do not have the capital to undertake such an overhaul, and if they do, they likely represent portions of the business spectrum too small to mitigate climate change on the scale necessary. Big Business is Business As Usual. It was, in large part, Big Business that got us into this mess, so it’s Big Business that needs to play a leading role in getting us out. In re-reading the latter sentence, I realize it sounds vindictive, but that’s not my intent. My point is simply that these are big problems, affected by a lot of variables. Those variables can only be addressed by a sufficiently large entity, such as Big Business.

Perhaps the scariest paragraph in Investor Leadership on Climate Change is the following: “…a trajectory of very rapid growth in investment in low-carbon energy supply is required – reaching US$500 billion a year by 2020. Without this growth in investment, it is extremely unlikely that the necessary GHG stabilization levels will be achieved. We cannot afford a fall in levels of investment in this sector.” What makes this scary is politics. In the U.S, Big Business and Republican are all but synonymous. Recent polls show the majority of Republicans do not accept that climate change is being caused by human factors. If you don’t believe that Business As Usual caused these problems, where is the motivation to change it?