Today President Obama announced some major initiatives aimed to reduce carbon emissions into the atmosphere and abate the impact of climate change. Interestingly, last Monday I attended a panel session at the Triple Bottom Line (TBLI) Conference discussing the topic of climate change and how capital can be deployed to reverse the increase in carbon emissions.
The panel was moderated by Arian van Buren, Professor Sustainability Economics and Management from the Earth Institute at Columbia University. Richard Bookbinder from TerraVerde Capital Partners identified the core problem is population growth. In 1800, the world population stood at 1 billion and by 1927 it had doubled. Since the growth curve is exponential, 85 years later, there are now 7 billion people in the world. Population growth combined with increasing per capita wealth levels is driving greater consumption. As a result, in an economy powered by carbon-based fuels (coal, natural gas, and oil), CO2 is released into the atmosphere in ever greater amounts.
The panel included James Leaton, Research Director for Carbon Tracker , based in the United Kingdom. James laid out the scientific and the quantitative reality of climate change. Increased CO2 emissions are overwhelming the environment’s ability to absorb it, causing it to form an atmospheric blanket that traps heat. This threatens to push temperatures over 2 degrees Celsius, the acknowledged tipping point for drastic climate change.
Carbon Tracker, in collaboration with the Grantham Research Institute for Climate Change and the Environment at the London School of Economics and Political Science, conducted analysis to stress-test the carbon budgets. This analysis estimates that the available budget is 900 Gt of CO2 for an 80% probability to stay below 2°C and 1075 Gt of CO2 for a 50% probability by 2050. What is alarming is that in previous carbon budget estimates, the budget for 2000-2049 was 886 Gt of CO2 and we have already used half of that. Unfortunately, there are 2,860 Gt of CO2 in proven reserves of coal, natural gas, and oil under the control of companies. If these companies follow only a profit motive for their shareholders the climate balance will be tipped to unsustainable levels.
Mr. Bookbinder pointed out that investments in companies working to abate climate change are growth opportunities for impact investments. These include investments in forests that absorb CO2, retrofitting housing for energy efficiency, renewable energy projects, and other infrastructure activities. In that vein, Bettina Von Hagen of EcoTrust Forest Management, Inc. discussed how improved forestry management can produce a more sustainable environment. Mr. Leaton pointed out the risks of regulation, abatement, and replacement technologies threaten the perceived investment safety of coal, petroleum, and natural gas companies and that could reduce their valuations.
Triple Bottom Line Investments (TBLI) and impact investments can mark not only a change in the way we deploy our capital, but they can also be a first step in how we invest in the future of our planet.
-Ken Marienau, Mission Markets