The climate crisis demands radical solutions
Calls for more drastic measures to combat global warming are challenging governments to ramp up investments in clean technology and forcing companies to rethink business models. What kind of creative solutions will become mainstream, and how can investors capture the opportunities? Top scientists, investors and policy advocates outline the case for action.
More radical solutions are needed to halt the climate crisis before hope for humanity’s future is lost. That was the stark warning from Professor Sir David King, Chair of the Centre for Climate Repair and Climate Crisis Advisory Group and a former Special Representative on Climate Change for the UK Government, at the 25th Credit Suisse Asian Investment Conference.
King hammered home the message that time is running out to prevent a climate catastrophe.
“Climate change is the greatest challenge humanity has ever faced,” he said. “There is now no chance of keeping atmospheric warming below 1.5ºC and it will take huge action to keep it below 2ºC.”
Scientists are sounding the alarm over the irreversible loss of Polar ice caps, with rising sea levels worldwide threatening to displace millions of people and devastate food production. The Climate Crisis Advisory Group which King chairs has attributed recent extreme weather events to changes in the Arctic Circle, which is heating up 3.5 to 4 times as fast as the rest of the planet.
“If we have hot air over the North Pole, it drives cold air southward,” said King. “Last year the jet stream got locked in on the west coast [of the Americas], causing temperatures of -16ºC in Texas while British Columbia experienced 50ºC.”
King outlined a climate remediation plan based around what he calls the three Rs: Reduce, Remove, and Repair. As well as “deep and rapid cuts” to greenhouse gas emissions, he called for urgent action to remove emissions already in the atmosphere and reverse the damage done to the planet.
This includes radical ideas to restore the natural balance of the planet by emulating natural processes or biomimicry.
“We need to refreeze the northern Polar region by reflecting the sun’s rays away from the Polar Sea using artificially created white clouds,” he said. “We would use 700 to 1,000 remotely operated vessels to pump seawater into a fine spray that will rise into the atmosphere,” he said.
Scientists are also studying ways to restore the oceans’ biodiversity to absorb more carbon from the atmosphere, including a marine biomass regeneration project that aims to mimic the role of whales in the carbon cycle.
“Whales bring nutrients from deep in the sea to the surface, where their excrement provides a thin layer of nutrient in the sunlit sea surface, resulting in the rapid growth of a phytoplankton layer which is food for small fish,” King explained.
A virtuous circle
This kind of radical innovation will also be required in every carbon-intensive industry – but it is also an opportunity for those that lead the way.
Rob Kaplan, Founder and CEO of Circulate Capital, sees growing demand for recycled packaging, for example – simultaneously creating a business opportunity and reducing carbon emissions.
“A circular economy happens when we meet the needs of the future by using the resources we've already extracted from the environment and not needing virgin extractives anymore,” said Kaplan. “It is a unique opportunity to not just improve environmental outcomes, but also improve costs and profit.”
This circularity also involves rethinking how homes and cities are built. Concrete construction is highly carbon-intensive and presents disposal problems when buildings are demolished.
“The best pathway to focus on is to design for the end of life and think about materials that don't have the same end-of-life challenges that concrete does,” said Kaplan.
Upending established business models in this way will require significant amounts of investment, but it also presents a chance for new companies to shine.
“We estimate that there's US$4 trillion of investment needed annually to solve the Sustainable Development Goals, and this obviously presents a very interesting opportunity for our clients,” said Emma Crystal, incoming Chief Sustainability Officer at Credit Suisse. “Connecting capital between the regions and between various sectors that we are active in is a key part of what we want to do for clients.”
Perhaps the greatest reason for hope is the younger generation, which is far more interested in sustainability than their parents or grandparents.
Eugene Klerk, Global Head of Environmental, Social and Governance (ESG) Research at Credit Suisse, labelled consumption as “the ultimate driver of all emissions”, highlighting a long-term shift in consumer choices that will support demand for sustainable products, such as solar panels, housing insulation, electric vehicles and hybrid cars, second-hand clothing and plant-based food.
A Credit Suisse survey of 10,000 young consumers found that this shift is especially pronounced among Gen Z and millennial consumers in less-developed countries.
“Consumers in emerging economies appear more engaged with sustainability, are generally more accepting of greater regulation, show an increasing willingness to pay for sustainable products and show a greater intent to change their behavior,” said Klerk.
China’s role in the transition
China, the world’s biggest emerging market, will be a key component in the global push to limit future emissions.
The 2020 announcement of China’s dual carbon neutrality targets – peak carbon emissions by 2030 and carbon neutrality by 2060 – was a “big bang” moment for ESG policy, according to Christine Loh, former Undersecretary for the Environment, Hong Kong, and Chief Development Strategist at Hong Kong University of Science and Technology’s Institute for the Environment.
“China is very clear that the world needs to decarbonize,” she said. “It will be very interesting to watch what the EU, China and the US are going to do, because if you add the three of them together, that's about 55% of the world's carbon.”
As well as decarbonizing its own economy, China’s capacity for manufacturing and technology has a lot to offer the international community, said Loh.
“China knows how to make all these things. They have the world's most complete supply chain on wind power and solar power, and they're still building out their capability,” she said.
Asian companies, however, can do more. Jamie Allen, Founding Secretary General of the Asian Corporate Governance Association, said most companies were not moving fast enough to respond to climate concerns.
“You see a few leading companies really thinking through the risks of climate change and are adapting their governance systems accordingly. But most companies are moving pretty slowly,” he said.
Climate change and sustainability reporting are the “two biggest catalysts” for improved corporate governance, said Allen.
“In this day and age, if you ignore those things, then you're not serving the market, you’re not serving your shareholders or your broader stakeholders.”
To King, the choice is very simple. Securing a livable future for humanity is only possible with immediate – and drastic – action.
“We are used to looking back six or seven thousand years into human history,” he said. “At the moment, can we look forward that far?”