The Economist USA - 21.09.2019

(Barré) #1

70 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

Free download pdf