Climate Change: Opportunities for the Future

Every year, very intense natural disasters are registered around the world. In 2019 alone, storms, cyclones and flooding led to losses exceeding US$ 1.0 Bn. in the United States. In India, temperatures topped 49°C (degrees Celsius) in the northern part of the country. This heatwave killed 90 people in the summer of 2019. In Mozambique and Zimbabwe, the tropical Cyclone Idai killed more than 900 people and destroyed almost 90% of Mozambique’s second-largest port.

According to the US National Center for Atmospheric Research, at least 50% of the intensity observed in the recent hurricanes held in the US has been explained by the average temperature increase of the planet. In fact, since the beginning of the 20th century, the average temperature of the planet has increased by 0.8 °C, and its growth rate has been accelerating. Thus, between 1901 and 1975, the global average temperature increased at a rate of 0.8°C per century. From 1975 onwards, the rate of change has more than doubled. If this trend continues, the global temperature will increase between 3 to 4 degrees Celsius in the next 80 years. There is no precedent in history in which humanity has witnessed an equivalent increase in the global temperature in such a short time.

According to the IMF, even if it is considered a temperature increase of just 2°C, between 30% to 40% of the entire territories of Africa, the Middle East, and Latin America will be affected by stronger heatwaves by 2040. This situation could imply that coastal countries such as Surinam, Camboya, Vietnam, or Bangladesh could lose more than 10% of their GDP. Given the significant consequences of this climate disasters over the capital stock of an economy and the increase in the intensity of this kind of event in the next decades, it is essential to invest in measures of mitigation and adaptation to climate change. To accomplish the goal established in the Paris Agreement of sustaining the increase in the global warming temperature in less than 2°C, it is necessary an annual investment of US$100 Bn., which is equivalent to Slovakia’s GDP.

This big effort is now in process. For example, the Chinese city of Shenzhen has become in the first city to implement an entire float of electric buses for public transportation. Furthermore, 70 countries that are responsible for 20% of greenhouse gas emissions around the world are now applying taxed to activities that contaminate the most.

On the corporate side, more than 700 companies worldwide with a market capitalization of almost US$20 Bn. have adopted measures to reduce their annual greenhouse gas emissions, which are equivalent to India’s gas emissions. Investors have taken an increasingly active role in pushing corporate management towards incorporating climate change into their business plans and strategy. The number of climate-related shareholder proposals has almost doubled since 2011, and the percentage of investors voting in favour has tripled over the same period.

All these measures will not only help to offset the impact of global warming but also will represent a growth opportunity for some industries. Thus, the investment in infrastructure for clean energy will generate more than 24 million job positions per year around the world by 2030, while the green bond market will reach a total size of US$1.0 Trn. (now the size is US$200 Bn.). According to a recent survey taken to eight countries, the climate crisis is viewed by the public as the most crucial issue facing the world, ahead of migration, terrorism, and the global economy. The consensus of the population around this problem could represent an opportunity to generate a positive change in the climate process that the entire world will experience in the next decades.

Number of climate-related shareholder’s proposals and % vote in favour 

Gino Beteta