It’s hard to miss the confluence of events and signals that constitute a blaring alarm in pretty much every region: climate change is an economic reality. Not sometime in the science-fictional future. Right now.
Boston is drying out from recent flooding that effectively shut down parts of the city and is bracing for another midweek storm. It’s a local reminder of a global issue that is being addressed too slowly by too few people with too little resources at their disposal.
In a phrase, show me the money. It’s long past time for the private sector to understand that investing in climate adaptation isn’t a philanthropic or socially minded pursuit. It’s economics.
Some specific thoughts:
The models are coming. Right??
An incredibly timely and on-point article from the New York Times (What Land Will Be Underwater in 20 Years? Figuring It Out Could Be Lucrative) offers a glimpse of progress, noting a start-up company’s pilot project to “analyze weather and hydrological data and combine it with climate model projections to assess the potential climate risks.” We’d argue that after years of increasingly intense storms that have crippled entire regions, such modeling should be well beyond the pilot stage, no?
Consider this observation from the same article: “As companies around the world grow concerned about the risks of climate change, they have started looking for clarity on how warming might disrupt their operations in the future. But governments in the United States and Europe have been slow to translate academic research on global warming into practical, timely advice for businesses or local city planners.”
Set aside the fact that we’re already well into the reality of climate change disrupting businesses. The private sector must acknowledge that without rapid adoption of mitigating approaches, risk will soar. Those who provide well-crafted and financially sound solutions will not only be offering needs-based product, they will be defining entire new sectors.
Resilience is taking center stage.
In the wake of Hurricanes Irma and Maria, the Caribbean recovery process is shining a light on how much must be done to create true resilience in exposed areas – and how critical private sector involvement will be. Tesla leapt into the fray to get solar power to high priority facilities in Puerto Rico. The energy leader not only brought much needed help to the island, it also got to test and show off its solar and storage deployment. Meanwhile, the government-sponsored energy contractor was shut down due to conflicts and inefficiencies. Huh.
In the US Virgin Islands, longer term efforts are underway to diversify the local economy. Friend and client RTPark is attracting impact-minded business owners that can bring technology and knowledge based businesses to the Territory. The result is a growing wellspring of investments and programs that contribute directly to enhancing on-island skills and resources – an excellent example of government and the private sector collaborating to promote resilience and affect positive change.
Sustainable investing continues to gain traction.
A report by Market Strategies noted that institutional investors are beginning to embrace ESG, and the more money that flows into social spaces from financial advisors and institutions, the more the private sector will turn its attention to climate change solutions (among many other issues).
However, that momentum is also in danger of being diluted by the emphasis on oversimplified ESG (Environmental, Social, Governance) vehicles that are nudging into the mainstream. Without universal adoption of guiding principles — and the U.N.’s Sustainable Development Goals provide a solid start – the scalability and impact of such investments will be severely limited. It falls to the advisor community and fund companies to stay thoughtful, diligent, and constructive as they offer paths to sustainable investing.
Change is never easy.
Profitable change gets a leg up, which means the private sector must lead the way. When the world evolves, smart business evolves ahead of it and smart investing sees the trends for what they are.
In the meantime, we’ll be out fishing in downtown Boston. We hear the bass are biting in Post Office Square.
