Confirmation of a rapid rise in renewable energy and a decline in coal use should be cause for celebration. Instead, the upbeat forecast issued by the International Energy Agency in its annual report also came with a negative outlook on climate change. While renewable power is estimated to supply 40% of the world’s electricity by 2040–faster than the agency predicted–the rate will not be fast enough to curb climate change unless urgent action is taken. This analysis parallels another report issued by the United Nations, which paints a more dystopian picture of a world facing cataclysmic environmental degradation within just a few decades unless global government, technology, and industry stakeholders work together.
While the two reports point to the potential of clean technologies to mitigate climate change, I disagree with them on one simple fact: We can’t rely heavily on the global public sector to push through the reforms we need. Political debate is increasingly polarized and achieving policy consensus seems elusive. In the short-term, we must focus more of our efforts on encouraging industry to adopt the new technologies that will bring about real change.
As intractable as climate change seems, we now have proven technologies to curb emissions, and, in many cases, there’s a solid business case for companies to invest in them. But a combination of prioritizing short-term profits and risk aversion leads many of our biggest firms to be over cautious when upgrading to sustainable technologies. In short, we don’t have an innovation problem, we have an adoption problem–and we’ve been giving industry leaders a free pass.
Let me put into context the potential impact of cleantech innovations on combating climate change. Here in Canada, the country’s annual greenhouse gas emissions add up to just over 700 megatonnes. My organization incubates more than 200 clean technology ventures. Innovations from just three of these companies have the ability–if industries embrace their technologies widely–to help save 80 megatonnes of emissions per year. These three companies are just the tip of the iceberg; imagine the emission reductions we could generate if all of our cleantech innovations were operating at scale.
So, how do we get corporations more engaged on the climate change issue?
First, business leaders need to help shift broader perceptions from viewing clean technologies as experimental ideas to viewing them as impactful resources. The truth is that many cleantech ventures are creating intellectual property by building off technologies already proven in the marketplace. One I work with, for instance, uses air compressors to store clean energy and is looking at repurposing old coal power stations because it could hook up to the existing transmission wires. Another in our portfolio is capturing carbon dioxide in concrete, which works just like the concrete construction firms are used to using. This mix of innovation and familiarity helps de-risk these technologies.
Next, the notion that there has to be a trade-off between sustainability and profitability needs to be laid to rest. By their nature, clean technologies reduce resource consumption–and therefore cut costs. LED lighting retrofits, for instance, can cut energy use by more than half and pay for themselves in a few years. These measures are not only popular with customers, they’re also increasingly important to workers. It’s no coincidence that Apple and Google, which compete fiercely for talented engineers in a tight labor market, are leading the corporate charge towards using only renewable energy. It’s good for the planet, and it’s good for their profits.
Lastly, the world’s biggest pools of capital need to be mobilized off of the sidelines. Sovereign wealth and pension funds manage trillions of dollars, and that kind of money speaks with a loud voice. Many of these funds have been in the vanguard of efforts to divest from fossil fuels and nudge their portfolio companies down more environmentally sustainable paths. But we need them to be bolder still and invest in technologies and projects that accelerate the transition to a low-carbon economy. These funds have gravitated towards steady investments like toll roads, airports, shopping malls, and bridges, but I believe climate change alters the risk calculus. Real estate assets are particularly vulnerable to catastrophic events like the wildfires sweeping California because they can’t be moved out of harm’s way. So investing in technologies that can reduce the frequency of these disasters will help funds future-proof their entire portfolios.
At this point, any major company that is not actively trying to reduce its carbon footprint and mitigate climate change is failing to manage risk. This is not the time for company executives to hide behind fiduciary duty to shareholders to justify continued inertia on this file. Make no mistake, there is a clear opportunity for financial return: Globally, the clean technology industry is expected to be worth $2.2 trillion in 2022. By 2030, it will be $3.6 trillion. Converting to clean technologies is no longer the leap of faith. Failing to do so would be.
Yung Wu is the CEO of MaRS Discovery District, a Toronto-based global innovation hub.