“Climate change…is a business opportunity masked as a crisis.” So says the Carbon War Room, and in its former CEO Jigar Shah’s 2013 book “Creating Climate Wealth,” he made the case that we could solve our global climate and environmental issues while at the same time creating a new $10 trillion economy.
This was a case based in part on the International Energy Agency’s extensive 2012 study that concluded that amount could be profitably invested to stay on a track to keep global temperatures below the 2˚ C increase. This new economy would consist of many new multibillion-dollar industries, which in total, was his definition of “creating climate wealth.”
How could we best (and quickly) create this new climate economy? Well you could of course read his book, but allow us here to summarize that to get the needed $10 trillion (estimated) into climate change solutions, we needed to attract mainstream investors and not just “impact” investors who limit their investments with a belief that they ultimately sacrifice some returns for positive impact.
The key to that, and by example he states how the solar industry in particular has become a $100 billion industry, is by changing perceptions, and attracting entrepreneurs and mainstream capital with opportunities that provide both high impact and high returns; getting to scale quickly by developing investments for traditional investors that go beyond emotionally compelling ones to financially compelling ones, and to put those investments on equal footing “with the other parts of their profit-generating portfolio”.
And, importantly, we didn’t need to wait for technology or new discoveries to expose these opportunities. Studies by McKinsey & others referenced by Shah in 2013 showed that “approximately 50% of the climate change challenge can be addressed profitably by existing technologies”. Shah concluded “to deploy these proven technologies requires a systematic approach to bringing confidence to institutional capital and then engaging the right stakeholders.”
So, how have we been doing?
Judging by a wave of 3rd quarter announcements, global investment in clean energy is showing record increases, and may now be starting to really embark on the journey to reach the lofty levels the new economy, and climate success, demands.
Goldman Sachs announced that they will invest $150 billion over the next 10 years in clean energy financing. This is significant because in 2012 they announced a 10 year, $40bn goal, and in year 1 had already deployed $10bn of that, or 25% of their goal. Now just 3 years in, they have already invested 93% of that $40bn. So Goldman has now set an impressive new goal, formulated perhaps 7 years before they originally thought. Speed and scale of investment, two vital cogs if we are to be successful in reaching our climate goals.
As Barbara Grady of GreenBiz further points out, other major financial institutions are following suit: Citi announced a $100bn “finance target” over the next 10 years, and here again, this amount doubled its last commitment of a $50bn, 10 yr. pledge which was reached in only 7 years; Bank of America plans to invest $125bn over the same period of time in “low carbon business”.
Bloomberg reports overseas we are seeing even greater amounts being invested with China leading the way at $83.3bn in 2014 alone, and 3rd qtr., 2015 increases by Brazil (131%) and Chile helped enable global investments to reach $70bn in the quarter. The U.S. showed a 25% increase vs. Q3 2014 at $13.4bn, and we are now seeing the biggest worldwide clean energy investment on record of $329 billion in 2015.
Michael Liebreich, chairman of the advisory board at Bloomberg New Energy Finance, commented: “part of the explanation is the ongoing improvement in cost-effectiveness of solar and wind relative to fossil fuel generation. That is enabling those renewable energy technologies to attract a big share of power sector investment everywhere from China and Japan to Latin America and South Africa.”
As nice and promising as this all sounds, perspective rears its ugly head: $10 trillion equals $10,000 billion. We’ve got a ways to go, and not very much time.
But this does show that money and mainstream investors around the globe are significantly increasing their positions in clean energy, and with this one hopes speed and scale of capital will grow exponentially. Grady summarizes “they (investors) no longer view renewable energy as an outlier to the mainstream economy.” That is precisely the perception point where we needed to get to, as Shah wrote in 2013.
The $10T premise also shows a marked reversal from the position taken by some that switching to renewable energy will have an overall negative impact on our economy and cost jobs. No doubt the transition will cost some jobs and push obsolescence in certain fossil fuel sectors, but those losses will be dwarfed by the creation of new jobs and the new economy.
And jobs not just in power generation, but in all clean energy fields as well as numerous ancillary fields and industries, and yes, even those solely having to combat the effects of climate change. For instance I’m sure if you know anything about seawall construction, the inhabitants of the 1,000 disappearing Marshall Islands would love to talk to you, as probably would inhabitants of Bangladesh, Miami, lower Manhattan and countless other low-lying locales.
A massive new global economy is within our reach. One that can benefit developed countries, but even more so developing countries, while moving our planet towards a healthier, more sustainable future. It can fuel a cohesive worldwide movement and provide the economic structure to transition our practices and protect our ecosystems. Shah calls it “the greatest wealth opportunity of our time.”
The change to a new climate economy has begun.
Thad Wharton founded and runs Broken Arrow Marketing, a specialized practice that promotes non-profits and businesses through artist endorsement relationships, with a focus on clean energy endeavors. A graduate of the University of Oklahoma’s Energy Land Management program, he began his energy career acquiring landowner rights to drill oil and gas wells, but left the oil patch and has been an ardent renewable energy supporter ever since. Wharton can be found on his free time running a record label for international singer-songwriters. Follow on twitter: @BrokenArrowMkt
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Graph Information: Bloomberg New Energy Finance