Climate change action unlocks new business – US$130 trillion committed. The world is on the threshold of an exciting new industry
November 3, 2021 was ‘Finance Day’ at COP26, and the spotlight was on a big announcement as nearly 500 global financial services firms agreed to align $130 trillion – some 40% of the world’s financial assets – with the climate goals set out in the Paris Agreement, including limiting global warming to 1.5 degrees Celsius. With big money flowing into climate change, technology companies are quick to tap into Save-The-World opportunity which appears to be the biggest business prospect for the next few decades.
A digital twin of the earth
Nvidia CEO Jensen Huang boasted at the recently held GPU Technology Conference (GTC), promised a digital twin of the earth. “We will build a digital twin to simulate and predict climate change,” he said, framing it as a tool for understanding how to mitigate climate change’s effects. “This new supercomputer will be E2, Earth 2, the digital twin of Earth, running Modulus-created AI physics at a million times speeds in the Omniverse. All the technologies we’ve invented up to this moment are needed to make E2 possible. I can’t imagine greater and more important news.”
Salesforce launched its Sustainability Cloud, designed to help customers track and reduce their emissions and take action through a full view of their environmental footprint with investor-grade data for customizable ESG reporting. Amazon has become the largest purchaser of renewable energy, with over 10 GW of capacity, and the totality of Amazon “looks like the world at large” with its data centres, warehouses, vehicles, devices, movies and complex supply chain.
IoT and automation can decarbonize
The mobile industry has pitched the use of mobile and digital technology is a key enabler and accelerator of the decarbonisation transition. Industry body GSMA, argues that rapid adoption of Internet of Things, 5G, will significantly reduce carbon emission. It says that four key industries that account for 80% of global emissions – manufacturing, power and energy, transport, and buildings, and for each there is a telecom solution.
The manufacturing sector, for instance, is responsible for approximately 16 Gt of CO2 per year, equating to around a third of all industries. To put this in perspective, the emissions are roughly the same as those emitted by 4,000 coal-fired power plants in a year. The mobile industry argues that large-scale digitisation of manufacturing could help cut down on emissions. It involves the use of higher-grade automated production equipment with IoT sensors that can be monitored and adjusted in real time by machine learning algorithms in the Cloud.
5G to the fore
Installing low-latency connectivity, including through private LTE and 5G networks, is an important infrastructural underpinning. The net effect is higher productivity, energy efficiency and lower carbon emissions directly and indirectly. Outside of investment in digitisation, a host of strategies involve factory and warehouse design, more sustainable use of materials, reduced use of plastics in production, and the overarching development of a viable circular economy. All this will require major funding, which it seems is now being committed by companies, funds, banks and governments.
Financial world sets a roadmap
The financial world has woken up to the climate crisis and appears willing to supply much of the capital that will be needed to transition to a net-zero economy. A paradigm shift has happened. Before, climate finance was seen as a task without returns. It was a sinkhole. Now climate finance is seen as one of the most profitable investment strategies out there. That changes everything.
The Finance Day commitment at UN’s COP26 came with a roadmap by which the companies involved, included most of the major Western banks, must use science-based guidelines to reach net-zero emissions by 2050, and commit to interim goals towards a 50% reduction by 2030, and even a 25% reduction in the next five years. This means adjusting their business models, developing credible plans for the transition, and then implementing them. But unlocking systemic change will require collaborative, ambitious commitments, and near-term action across the entire financial system.
Past promises were belied
However, past promises on achieving climate investment goals had not been met. At COP15 in 2009, climate finance funding of $100 billion a year by 2020 was agreed to support resilience, adaptation, and energy transitions in developing countries. The promise is now officially delayed to 2023.
Nevertheless, things appear to be a bit different today. The clearest example of this came during the conference from former Bank of England Gov. Mark Carney’s Glasgow Financial Alliance for Net Zero. The group aims to provide $130 trillion in private capital to the net-zero transition by 2050 and is backed by an army of 450 fund managers, banks, pensions and other asset owners.
On the threshold of a new industry
On the threshold of a new industry
The world is on the threshold of an exciting new industry that will require, talent, technology and global political will to Save The World. “We are literally here creating a new industry, new ground rules for a new industry that is prioritizing climate action. For that we need all the traditional things, we need measurement, we need metrics, we need reporting…”, added Audrey Choi, Chief Sustainability Officer of Morgan Stanley.
Patricia Espinosa, the Executive Secretary of the UN Framework Convention on Climate Change (UNFCCC), urged the corporate sector to make climate change action a part of their business portfolio, not just for their shareholders, but for their own survival. “There is no doubt that there must be a deep transformation of the world’s economy and the private sector must be part of it. “The private sector is realizing that climate risks are very important for their portfolios and they need to align them to a more sustainable way of doing things,” she emphasized.