The Economist UK - 21.09.2019

74 Business The EconomistSeptember 21st 2019

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voltage electric grid, TransWest Express, to

send 3gwof wind power (which he is back-

ing separately) from blustery Wyoming to

electricity-hungry California. It should

start construction in 2020.

Or take Bill Joy, who co-founded Sun

Microsystems. As befits a self-assured Sili-

con Valley software pioneer, he reckons his

climate bets could tackle half of all annual

greenhouse-gas emissions. In 2011 he

backed Beyond Meat, a maker of plant-

based alternatives to burgers; meat pro-

duction accounts for 14.5% of global emis-

sions. The company’s share price is up six-

fold since it went public in May. To clean up

cement-making (6% of emissions), in 2014

Mr Joy invested in Solidia Technologies,

which has found a way to cut the industry’s

carbon footprint by 70%. LafargeHolcim, a

Franco-Swiss cement colossus, is helping

commercialise it.

Beyond meat and cement

Besides imminently scalable ventures, Mr

Joy has supported speculative ones like

Ionic Materials, a firm that has come up

with an energy-storage technology that

uses solid polymers (Wired, a magazine

popular among geeks, called it the “Jesus

battery”). When it comes to moonshots,

though, it is hard to beat Mr Gates. This

week the co-founder of Microsoft told the

Financial Times that those who want to

change the world should stop wasting time

urging investors to dump fossil-fuel stocks

and put their money and energy behind

disruptive technologies.

Mr Gates is putting a part of his $105bn

fortune where his mouth is: into blue-sky

projects. Literally, in the case of Carbon En-

gineering, a company working to turn CO 2

in the air to fuel. Because its carbon is being

taken from the atmosphere, it has no net-

effect on the atmospheric stock when

burned. He co-founded TerraPower, which

has developed a new type of nuclear reac-

tor. And in 2016 he launched Breakthrough

Energy Ventures, a $1bn pot of “patient,

risk-tolerant capital” to bankroll technol-

ogies that radically cut annual emissions.

Only those with the potential to shave

500m tonnes (1% or so) or more off today’s

global total need apply. Investments in-

clude Boston Metal (which aims to decar-

bonise steelmaking) and Commonwealth

Fusion Systems (which is pursuing nuclear

fusion). Fellow plutocrats have been enlist-

ed into the fund: Mr Bloomberg, Amazon’s

Jeff Bezos, Alibaba’s Jack Ma, Masayoshi

Son of SoftBank and Mukesh Ambani of Re-

liance, an Indian conglomerate.

The last kind of climate tycoon does not

seek returns, at least directly. Jeremy Gran-

tham of gmo, a $70bn investment fund, is

giving away most of his $1bn fortune to cli-

mate politics and research. It isn’t really

philanthropy, he says. “It’s sensible defen-

sive investing in the broadest sense.” Mr

Bloomberg has poured $500m into Beyond

Carbon, an initiative to kill off coal plants

in America by financing green lobbyists

and politicians at state and local level.

Our twelfth apostle of climate action is

not himself deep-pocketed. But Pope Fran-

cis, the greenest pontiff to date, has ulti-

mate control over the Vatican Bank’s $3bn-

worth of assets—and a bully pulpit to exer-

cise moral suasion over much more. In

June he rounded up oil bosses from bp, Ex-

xonMobil, Shell and Total, and strong-

armed them to support “economically

meaningful” carbon prices and disclose

risks posed by climate change to their com-

panies (see next article).

Our list is necessarily incomplete. Other

fat cats back clean investments. So do

firms, even historically carbon-cuddling

ones like gm, whose carmaking prowess

may do more to popularise evs than Tesla,

or McDermott, which builds oil rigs but

whose subsidiary has put money in net

Power, a builder of power plants in which

carbon dioxide released by burning natural

gas in pure oxygen is heated and then used

instead of steam to turn a turbine (with any

excess captured).

Many clean bets continue to rely on tax

breaks, subsidies or the prospect of high

carbon prices. Plenty will fail in the mar-

ketplace. But some may succeed. Without

creative destruction powered by climate

capitalists, including profit-seeking ones,

safeguarding the planet would be consid-

erably more daunting than it already is. 7

Cooling sentiment^1

Source:BloombergNEF *ToJune30th

Investment in clean energy, $bn

0

50

100

150

200

300

250

350

2004 06 08 10 12 14 16 19*

China

UnitedStates

Restofworld

Europe

Climate Croesuses^2

Source: Forbes

*BillJoy,RubensOmetto,ZhangYue,

Robert Friedland andJeremyGrantham

Selectedbillionaires,networth,2019,$bn

Bill Gates 105.4

Michael

Bloomberg

52.4

Elon Musk20.1

Philip Anschutz 11.5

AloysWobben5.8

Wang Chuanfu 4.2

Others* 6.2

L

ike allhuman enterprise, business is

threatened by climate change. And, as

with humanity as a whole, these risks may

not become catastrophic for the corporate

world for decades. But some corporate citi-

zens will be vulnerable sooner—if they are

not already. Global regulators, such as the

Financial Stability Board (fsb), want firms

to get to grips with the three ways in which

the climate affects their prospects

Physical effects of global warming—ris-

ing sea levels, drier droughts, stormier

storms—imperil factories and other assets,

as well as transport and energy links that

knit supply chains together. They hurt

worker productivity—or, if companies

spend on adaptation, like air-conditioning

to keep employees cool, increase over-

heads. A study of over 11,000 globally listed

firms found that accounting for physical

risks would shave just 2-3% off their mar-

ket value on average. But the most exposed

could lose 20%.

The risk of climate calamities rises im-

perceptibly quarter to quarter. For most

firms it would become material when pre-

sent-day assets, which seldom last more

than 15 years, and bosses, who typically

stick around for less, are a distant memory.

Even long-term asset managers tend not to

hold on to shares for more than a decade.

Credit raters and insurers are trying to fac-

tor in physical risks when evaluating bor-

rowers and pricing premiums. For now, the

market signals are too subtle to detect.

Investors are more attuned to “transi-

tion risks”. Carbon taxes, tradable emis-

sions permits and other policies to chivvy

along the process of making economies

greener impose costs on companies. Of the

195 signatories of the Paris climate agree-

ment, 81 mention a carbon price in their

pledges to limit global warming. Half of

those have announced a carbon tax, cap-

and-trade scheme, or both. Add state and

local schemes, and they cover 15% of the

world’s emissions, up from 4% in 2010.

Being a function of politics rather than

physics, transition risks are less certain

than physical ones. The costs are currently

trifling; governments raise perhaps $30bn

a year worldwide in carbon levies, a frac-

tion of the $2trn in profits that America Inc

generated last year. But if they lived up to

the Paris deal’s aim of keeping warming

within 2°C of pre-industrial levels, 15% of

A short guide to global warming’s

consequences for companies

Business and climate change

Planet Inc